Informal value transfer system

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Many cultures use informal value transfer systems, such as the hawala widely used in the Middle East and Asia, where value is transferred through a network of brokers, who operate with funds often not in banks, with the value transfer orders through personal communications among brokers. The brokers know one another and operate on a paperless honor system.[1]One of the challenges of anti-terrorist financial intelligence (FININT) is that surveillance of transactions only works when the value transfers go through conventional, regulated banks and other financial institutions.

A study from the Institute for Defence Studies and Analysis [India] describes "narco-terrorism" as "the nexus between narcotics and terrorism...It is recognised as one of the oldest and most dependable sources of terrorist financing, primarily because of the magnitudes of finance involved in both the activities."[2] The study indicates that informal value transfer systems, known "... [in] India it is known as hawala, in Pakistan as hundi, in China fei qian (flying money), in Philippines as black market peso exchange" are important means of transferring funds to terrorist organizations.

Countermeasures to IVTS

Some hawala brokers have placed some of their reserve funds in banks, where they have been frozen by national economic warfare activities.

For example, the U.S. Office of Foreign Asset Control, on November 7, 2001, the Treasury Department made raids and freezes to shut down two hawala networks, Al Barakaat and Al Taqwa, both believed to be funneling millions of dollars from the United States to abroad to support terrorist activities. In addition to the placement of 62 people and groups associated with the two organizations on the asset freeze list, FBI and U.S. Customs agents raided the two networks' offices in six U.S cities. [3]

References

  1. United States Department of the Treasury, Financial Crimes Enforcement Network (March 2003), Informal Value Transfer Systems, FinCEN Advisory Issue 33, FinCEN-2003-33
  2. Jamwal, N.S., "Terrorist Financing and Support Structures in Jammu and Kashmir", Strategic Analysis: A Monthly Journal of the IDSA (Institute for Defence Studies and Analysis [India]) XXVI (1)
  3. CDI Terrorism Project (5 March 2002), The Financial War Against Terrorism, Center for Defense Information