In stark contrast to the 9/11 Commission Report that highlighted the significance of hawala to al-qaeda, the 336 page U.S. Department of State Country Reports on Terrorism 2006 had just two references to the word “hawala.” Even the 112 page 2007 National Money Laundering Strategy included only 14 references to the word “hawala.”. For its part, FinCEN appears to view hawalas as merely one facet of the Informal Value Transfer System. Consequently, FinCEN Advisory Number 33 provides little substantive guidance on hawalas per se. This despite the 9/11 Commission report conclusion that: “Al-Qaeda frequently moved the money it raised by hawala… networks operating in Pakistan, in Dubai, and throughout the Middle East… [T]here is little evidence that Bin Laden or core Al-Qaeda members used banks while in Afghanistan.” In 2006, the RAND Corporation noted that: “terrorists are increasingly using the informal hawala transaction System.”
Case in point, according to India’s Inspector General of Police, Shiv Shankar, a $600,000 ransom paid for the release of Indian businessman Partha Roy Burman found its way to 9/11 hijacker Mohammed Atta. The money was channeled via a hawala broker in Hyderabad called Abdul Kareem, who had the money sent to a man named Shafiq in the Gulf, who in turn arranged for the money to be made available to Mohammed Atta. That being said, it appears that only $100,000 made its way into Atta’s bank account in Dubai.
This is an example of how hawala works: Abdul a Pakistani taxi driver living in New York wants to send $5,000 he has saved-up to his brother Mohammad who is living in Karachi Pakistan. The hawala transaction proceeds as follows: Abdul gives the $5,000 to Yasmeen a hawala dealer (“hawaladar”) in New York. Yasmeen contacts Ghulam another hawaladar in Karachi, and gives him the details of the transaction. Ghulam then arranges to have the agreed upon local currency delivered to Mohammad.
In January 2000, Interpol published the first major piece on the hawala system. In November 2002, Robert Looney published the next significant work on hawala. In June 2003, the World Bank produced by far the best publication yet on hawala. These authors highlighted the significant benefits of hawala to migrants and terrorists alike: First, it is anonymous and therefore hard to detect. The hawala system often utilizes coded notations only understood by the hawaladars to identify both the transaction and the parties. Second, there is a lack of transparency on account of the fact that the transactions often occur over the phone or via email between the hawaladars, relying on the local dialect and cultural nuances to communicate. Third, the hawala transactions are safe and reliable. There is next to no history of fraud or embezzlement. This is in no small part due to the reliance on trusted family and tribal relationships to carryout the transaction. Fourth, the transaction is effected quickly, because it transpires in the space of one or two short phone calls or emails. Fifth, the hawala system offers instant global coverage, in particular to remote parts of Asia and the Middle East. Sixth, it is inexpensive by comparison to the money transmitter fees charged by for example Western Union or HSBC. Seventh, there is little to no paper trail. At best a cryptic note and an obtuse reference in a ledger. All of which makes investigations very difficult. Eighth, there is the practice of mixing hawala activities with other business activities, as well as the commingling of funds. These practices make auditing and prosecution almost impossible. Ninth, no money ever changes hands. The first hawaladar merely gives the instructions, and the second hawaladar using his own local funds delivers the money to the recipient, often to his or her home or office. At a later date, accounts between hawaladars are reconciled, often using gold or diamonds. (See also the ICT Report)
In the face of this formidable challenge, the FATF has tried to come-up with AML solutions, including under special recommendation VI, the need by member states to license hawalas. In addition, the FATF has issued best practices for hawalas. Regulations are now in place in Afghanistan, Germany, Iran, Iraq, Libya, Pakistan, Qatar, Saudi Arabia, Singapore, Syria, Thailand, UAE, UK and the USA.
On November 4, 2002, the Central Bank of the UAE began to register and regulate hawaladars. As of April 2007, the UAE had 220 registered hawaladars, and has nine prosecutions for money laundering. However, there is no penalty for hawaladars failure to register with the Central Bank. In addition, according to the 2007 INCSR, to date, no SARs have been filed by hawaladars in the UAE. A significant shortcoming when one considers that Dubai is the regional hawala center, and a major transit point for Al-Qaeda terrorist funds. For example, on May 4, 2007, it was reported that Naresh Chandra Jain confessed to using a network of hawalas in Dubai, Italy, UK and U.S. to funnel $50 million to al-Qaeda.
According to the U.S. Department of Treasury, officials in Pakistan estimate that more than $7 billion flows into the nation through hawala channels each year, up from $3 billion just a few years ago. During a September 2003 visit to Pakistan, U.S. Treasury Secretary Snow stated that: “some charities are engaged in funding terrorists through “hawala” cash flows.” It is to be noted that Pakistan has over 2.4 million Afghan refugees, among which there are Taleban and Al-Qaeda fighters and sympathizers, and all of which are the beneficiaries of funds from charities and NGOs. It is at the Jalozai refuge camp, 18 miles from Peshawar, that Ramzi Yousef, the mastermind of the first World Trade Center bombing in 1993, lived for a long time.
By comparison, Pakistan is a drop in the bucket compared to India. In 1998, the latest figure available, the amount of money in India’s hawala system was estimated at $680 billion, roughly the size of Canada's entire economy. Interpol estimates the hawala system to represent up to 40% of India’s GDP. Notwithstanding, the government of India neither regulates nor requires hawaladars to register with the government. One would have thought, regardless of the size of the challenge, in light of the large Muslim population and the ongoing unrest in the Kashmir that India would regulate as soon as possible hawaladars. Case in point, on April 16, 2007, Interpol issued a red corner notice for Rizwan Mohammed Dawrey. He is accused of using a hawala network between Pakistan, Saudi Arabia and India, in order to fund the July 11, 2006, Mumbai bombings. Dawrey is believed to be the fund manager of the al-Qaeda affiliate Lashkar-e-Tayyaba that is waging a terrorist campaign against India over their control of the Kashmir province.
Because of over twenty-five years of conflict, hawala represents the only effective remittance system in Afghanistan. There are now more than 300 registered hawaladars in the Kabul money market. However, estimates on the number of unregistered hawaladars in Kabul and around Afghanistan is somewhere between 500 and 2,000. Single transactions between Peshawar in Pakistan and Kabul in excess of $500,000 are not uncommon. In other words, Al-Qaeda based in the borderlands of Afghanistan and Pakistan has via hawala a very efficient and cheap way to transfer money.
In 2006, Afghanistan produced over 90% of the world’s opium (International Narcotics Control Strategy Report 2007). According to the UN, poppy cultivation in Afghanistan in 2006 had increased by 59% over the previous year. Afghanistan produced a record-breaking crop of 6,100 metric tons, worth a whopping $3.1 billion, of which $2.3 billion is believed to have gone to drug traffickers, including the Taliban.
According to Dr. Mustafa Alani of the Gulf Research Center, the Afghan government’s war on narcotics has led to increasing support for the Taliban and al-Qaeda. It is important to note that places where the Taliban are strongest in Afghanistan are also major sources of Opium. In 2005, 25% of the land growing opium was located in Helmand province, and 12% in Kandahar province. In 2006, in the face of a significant Taliban offensive, opium cultivation increased by 121% in the Southern region. As a result, opium cultivation in the Southern region was almost equal to the total opium cultivation for 2005 for the whole of Afghanistan. Helmand province in 2006 represented 42% of all opium cultivated in Afghanistan.
Hawala plays an integral role in Afghanistan’s drug trade. In Helmand and Kandahar provinces, 60% of funds transferred using hawala are narcotic related. In fact, Helmand province is a key facilitator of the opium trade for the whole country. Consequently, it accounts for $800 million in drug related hawala business, much of which is believed to go into the coffers of the Taleban.
In November 2001, U.S. Customs authorities charged Mohamed M. Hussein and Liban M. Hussein with running an unregistered hawala, Barakaat North America Inc. The hawala was used to funnel money to terrorist groups, including al-Qaeda. Between January and September 2001, the hawala moved more than $2 million through U.S. registered banks. As a result, also in November 2001, OFAC sanctioned Hussein and Barakaat North America Inc. for their terrorist financing activities.
On August 23, 2003, Hemant Lakhani, an Indian born British citizen, was charged and subsequently convicted of attempting to provide material support to terrorists, as well as acting as an arms broker without a license. He was sentenced to 47 years in prison. Lakhani wished to purchase and sell 50 shoulder-fired surface-to-air missiles to shoot down U.S. civilian airplanes, as well as large quantities of C-4 plastic explosives. Consequently, the cooperating witness gave co-defendant Yehuda Abraham, President of New York based Ambuy Gem Corp., a $30,000 cash down payment, which Abraham then transferred through his hawala to Lakhani in London.
On August 11, 2006, Monasser Mosad Omian, was sentenced to 30 months in prison, two years supervised release, a $200 special assessment, forfeiture of approximately $200,000 in cash and $9,693,669 in substitute assets. Jarallah Nasser Wasil was also sentenced to 57 months in prison, 3 years supervised release, a $400 special assessment, forfeiture of approximately $200,000 in cash and $9,693,669 in substitute assets. Both men originally from Yemen, were sentenced pursuant to their May 11, 2006 guilty pleas to operating a Detroit-area unlicensed hawala from 1999 through 2005, that sent $1.8 million to a Swiss bank account, and over $8 million to Yemen. Omian and Wasil collected over $9,693,669.62 from mosques, businesses, and individuals across the United States (including California, Colorado, New York, Ohio, Pennsylvania, Delaware, Washington State and Michigan) and sent it to Switzerland and to Yemen. They structured the cash transactions involving the Hawala in order to cause Comerica Bank and Charter One Bank to fail to file the cash transaction reports required by law and regulation for cash deposits and withdrawals over $10,000.
In light of the above, it is hard to understand why there appears to be so little regulatory focus on the required regulation and prosecution of hawalas involved in funding terrorism in the U.S.
This is a serious threat, this guys are well organized
Posted by: Philadelphia House | January 09, 2012 at 06:31