09 February 2004

Fears Over US Hawala Crackdown

Fears Over US Hawala Crackdown:

from British Broadcasting Corporation
Article ID: D139471

Fears have been raised that tighter regulation of the ancient hawala system of informal money transfers is harming the world's poorest economies.

The secret, ancient and complex trade in goods and money is widespread in the Middle East and Asia.

The US has been seeking to regulate hawala traders, fearing it could be used by terrorist groups to move money around the world.

But some are now fearing that this could jeopardize billions of dollars carried across borders to support trade in developing countries.

There is no direct movement of funds. Instead, a system of complex swaps is employed, using food, fuel, electronics or gold as a way of balancing the books between operators - hawaladas - in different countries.

However, because it operated underground and with no proper records, American authorities were keen to introduce regulation into the system.

"Hawala is one of the important things that everybody needs to be focusing on," stressed Danny Glazer, Director of the US Treasury's Executive Office Of Terrorist Financing.

"We have to make sure that all methods for transferring money - particularly for transferring funds across borders - is covered by effective anti-money laundering and counter-terrorist financing regimes.

"What we're trying to do is make things harder for the terrorist financiers - to close down as many mechanisms for moving money as we can, to make it as expensive as possible, to make it as much of a paper trail as possible, to close down as many of the bad operators as possible, to make life as difficult for them as possible, and to disrupt their activities as much as possible."

Treasury Deputy Assistant Secretary Juan Zerati - the man behind the attempt to tackle the financing of terrorism - told Assignment that it was important to track "all potential mediums" through which money could flow.

"Certainly, in terms of hawala, we are concerned that any time you have a lack of transparency, a lack of accountability with respect to the movement of money, there is potential that medium can be used by terrorists and criminals," he said.

And he stressed there was evidence that al-Barakat had been "used by al-Qaeda to funnel money to some of its allies and to support its operations.

"We've seen case studies... that provides greater incentive for us to make sure the hawala system worldwide is regulated as well as being monitored."

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