Minimizing Abuse of Hawalas

By John A. Cassara

John A. Cassara is a former U.S. intelligence officer and Treasury Special Agent.  He retired after a 26 year career in the federal government intelligence and law enforcement communities. He is  considered an expert in anti-money laundering and terrorist financing, with  particular expertise in the areas of money laundering in the Middle East and  the growing threat of alternative remittance systems and forms of trade-based  money laundering and value transfer. Since his retirement, he has lectured in the United States and around the world on a variety transnational crime issues. He is a industry advisor for SAS - the analytics company.

Hawala networks and terror finance are in the news again.  These networks have been used by ISIS in war-torn Syria and Iraq, and were reportedly used to help finance the 2015 ISIS attacks in Paris.  Hawala networks are still considered to be the national banking system of Afghanistan and are intertwined with the formal banking system of neighboring Pakistan.  Furthermore, Hawala networks exist in other troublesome spots where U.S. adversaries operate, such as the Horn of Africa and Libya. 

In a hawala transaction, someone wishing to send funds to someone else gives the money to a local broker, who then contacts a second broker at the destination.  The second broker gives the intended recipient an equivalent amount, less commissions. The system is based on trust, and most brokers are of the same ethnic group, and many are members of the same family, tribe, or clan. Prosecutors in the 1998 federal trial of Iranian drug trafficker and money launderer Jafar Pour Jelil Rayhani and his associates concisely defined hawalas as “money transfer without money movement.”

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