Cash transfers allegedly financed terrorism
In a fresh crackdown on terrorism the United States has accused several financial networks of financing Osama bin Laden's al-Qaeda movement.
One of the networks is the Ticino-based Nada Management Organisation, previously known as al-Taqwa, which is suspected of sending money illegally around the word.
The money transfers in question are known as hawalas, the Hindi word for trust. Under this cash-based system, remittance agents help people to send money internationally.Traditionally, the hawalas were used by people without bank accounts, who needed send funds.
The local hawala agent receives the money, issues a receipt of payment and informs the agent on the other side about the details of who is to receive the money and the amount.
Money laundering expert Mark Pieth describes this transfer system as “a Western Union for poor people” or a system operating on trust, as the money never actually leaves a country.
“Hawala is a kind of compensation system based on the assumption that some time there will be a flow in the other direction and simply compensates the other person,” he said.
No secret
Even though hawalas are not regulated in the Western sense, they are not secret or illegal at all. “They are used quite openly and are, by nature, not used by terrorists or criminal organisations at all,” Pieth told swissinfo.
However, some kinds of hawala-type systems are used by Mafia organisations, and they have been regarded as a potential problem by regulators and legal authorities who consider them conduits for the proceeds of crime.
Pieth, a former member of the OECD Financial Action Task Force, thinks that in the wider world of money laundering, the hawala system is quite a good mechanism for money launderers as “it creates a smoke screen”.
“Hawalas are a good way to transfer funds without carrying the money around and without running the risk of being found out carrying large amounts of cash.”
Even though hawalas have posed a potential problem, nobody has really done anything about them in the last decade.
“It is quite interesting that financial regulators in the West have not really bothered with hawalas in the last ten years. They have always been talking about them but nobody has ever made an attempt to regulate them,” Pieth said.
by Billi Bierling and Anna Nelson
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