hawala in the news again
StealthMonger at nym.mixmin.net
Sat May 15 03:44:21 PDT 2010
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Hawala has been discussed in this forum  in connection with the
design of digital money systems. Now hawala is in the news (again).
 For example:
Date: Mon, 13 Jan 2003 08:21:27 -0500
To: Digital Bearer Settlement List <dbs at philodox.com>,cypherpunks at lne.com
From: "R. A. Hettinga" <rah at shipwright.com>
Subject: Money laundering regulations
Sender: owner-cypherpunks at Algebra.COM
Why FBI is following the money in Times Square bomb case
Three Pakistani men arrested Thursday in Massachusetts and Maine may have used an
informal network known as hawala to channel funds to alleged Times Square bomber
Faisal Shahzad, officials say. Counterterrorism efforts have made it increasingly
difficult to transfer money by traditional means.
By Peter Grier, Staff writer / May 14, 2010
Three Pakistani men arrested Thursday in connection with the case of alleged Times
Square bomber Faisal Shahzad may be connected to an informal money-moving network
that terror groups are increasingly using to finance their activities.
The three men may not have known how Shahzad intended to use the money in question,
say the officials. Indications are they are not terrorist financiers per se, but
links in an informal network of brokers, known as hawala, used to transfer cash
quickly and easily over long distances.
"Hawala is a popular value transfer method that predates the Western financial
system and remains less expensive, and at times more widely available, than modern
banking for transmitting legitimate funds around the world," writes John
Rollins, a specialist in terrorism and national security with the Congressional
Research Service, in a March report on terrorists and transnational crime.
Thursday's high-profile law enforcement sweeps netted two men in Massachusetts
and one in Maine, according to the FBI. Sen. Susan Collins (R) of Maine said there
is no direct connection between the arrestee from her state and Faisal Shahzad.
Law enforcement officials instead indicated that the Times Square bomb suspect may
have used hawala money-moving services provided by the men.
Hawala dealers, also known as hawaladars, operate as part of an informal financial
network used to bypass the traditional banking system.
Here's how it works: Say a man in Pakistan wanted to send cash to a colleague in
the US. He would visit a hawaladar in his own country and hand over the money, plus
a fee of about 5 percent.
The Pakistani hawaladar would communicate with a trusted counterpart in the US, and
indicate who should get the money, and how much. The US hawaladar would then make
the payment. Usually, no money for that individual transaction actually travels
between the two countries. The US hawaladar would simply carry the debt until one
of hi s clients needed to send money to Pakistan. Then the whole process would be
carried out in reverse.
Hawaladars are supposed to obtain a license in the US, but few do. It's a
system that immigrants often use to send remittances back home, and that families
abroad use to send money to, say, students in the US.
But counterterrorist efforts have made it increasingly difficult for Al Qaeda and
its associated groups to send money through the regular banking system.
Increasingly the US and other nations have turned their scrutiny to the more
informal hawaladars, said David Cohen, assistant secretary for terrorist financing
at the US Department of Treasury, in January remarks before the Council on Foreign
"As we have become more successful in preventing the abuse of the formal
financial system, illicit finance has increasingly migrated to these other
transmission techniques," said Mr. Cohen.
According to Cohen, Al Qaeda's traditional sources of funds, such as donors
and charities in Saudi Arabia and other Gulf countries, have dried up due to world
counterterrorism efforts. Top Al Qaeda leaders in recent months have taken the
unusual step of issuing public pleas for funds.
"Al Qaeda is in its worst financial state in years," Cohen said in April
at a luncheon sponsored by the Washington Institute for Near East Policy.
According to news reports, Al Qaeda has even begun charging some recruits for
training. The going rate for an AK-47 rifle, ammunition, and grenades is about
But terrorist attacks in Western countries do not cost a lot of money. The 2004
Madrid subway bombings cost a total of about $10,000, f or instance, according to
an estimate by the Financial Action Task Force, an intergovernmental antiterrorist
Regardless of the amount, US counterterrorism officials still take a cue from what
Deep Throat told Washington Post reporter Bob Woodward during the Watergate
investigation: "Follow the money."
These days, that's a challenge.
"The international community faces a daunting challenge in confronting global
terrorism financing," Cohen told the Washington Institute luncheon. "The task is
especially tough in today's environment, with money constantly crossing
borders and rocketing around the globe."
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