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Sunday, April 26, 2009

A Hawala Example

A recruited Jihadist in the United States, say Minneapolis, MN collects enough funds to finance their service, from family or "mystery Scholarship." They then take the funds they will need to a Hawaladar (One who operates a Hawala) in their home city in the US (they are all over).

The Hawaladar has along established relationship with a counterpart Hawaladar in Pakistan, Afghanistan, Somalia or Iraq.

  1. The Hawaladar in the US collects all the funds, and may accumulate the funds for a later purchase
  2. The Hawaladar in the War zone pays cash in local currency to the Mujahadi-terrorist as he arrives in country.
  3. After enough cash debt has accumulated in the US, the War Zone the Hawaladar places an order for a commodity that is in high demand in his own country, that he can sell for a profit.
  4. The US Hawaladar uses the cash that has been accumulated to buy the commodity at local prices, usually less than the cash that has accumulated.
  5. The US Hawaladar then arranges to ship the commodity to the War Zone Hawaladar.
  6. When The War Zone Hawaladar sells the commodity order, each Hawala has made money, and the process can begin again.
  • Though both Hawaladars may have bank accounts, none of the transactions with the banks are tied to the terrorist money transfer.
  • All bank activities are tied to "client fees" and import and export activity.
  • No money actually moves between countries

New international record keeping requirements have been set in place to prevent money laundering, but the most abusive countries don' t participate, don' t have real over site or regulation, or corruption plays a role.

Some suggested ways to stop this transaction.

  • Flag and Monitor Three-party import/exports (US, Pakistan, Somalia, for example)
  • Enforce new Hawala documentation requirements with enough heavy fines to shut abusers down
  • Infitrate Western Hawaladars to see if there is a back-room terrorist money laundering operation going on with a legitimate remittance business going on in the front room.

Pakistan estimates that 5 Billion US Dollars a year pass through Hawalas in Pakistan.

finally, Hawalas are widely acknowledged to be the most common form of mid to low level financing and logistics for terrorism, and will remain so unless Western Hawaladars can come up with standards that will allow criminals to be tracked.

- Shimron Issachar

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