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Terror financing reliant on hawala, NPOs

February 4, 2013

The use of unlicensed money services businesses leads a new list published in the Journal of Money Laundering Control about the financing of terrorist operations.  The use of hawala for terrorism is followed by the use of nonprofit organizations (NPOs) such as charities, and the use of front companies comes in third place.  Their figures are in Australian dollars:

http://www.google.com/imgres?um=1&hl=en&sa=N&tbo=d&biw=1366&bih=572&tbm=isch&tbnid=_s_XH8uOV1y0AM:&imgrefurl=http://www.emeraldinsight.com/journals.htm%3Farticleid%3D17004748%26show%3Dhtml&docid=k5I0iwaRSW_p5M&imgurl=http://www.emeraldinsight.com/content_images/fig/3100150105019.png&w=921&h=452&ei=h3UIUY7qLcHq2AWJ_4CQDg&zoom=1&ved=1t:3588,r:9,s:0,i:111&iact=rc&dur=1270&sig=109810502792531716370&page=1&tbnh=157&tbnw=321&start=0&ndsp=11&tx=68&ty=74

Researchers Angela Samantha Maitland Irwin, Kim-Kwang Raymond Choo, and Lin Liu also find that terrorists are unlikely to use classic money laundering techniques such as placement, layering, or integration (which is consistent with prior Money Jihad analysis).  Their paper, “An Analysis of Money Laundering and Terrorism Tinancing Typologies” is based on an examination of 184 typologies published by financial compliance bodies.

This is very valuable research, and the authors have done very well to quantify the categories of terror financing.  It is somewhat unfortunate that data is not yet available from the various financial bodies on trafficking, insurance fraud, and the other types of financing mentioned in the chart.

Previously, Money Jihad has endorsed a 1 percent tax on hawala remittances to 1) provide for better tracking of hawala by putting hawala dealers under the jurisdiction of tax authorities rather than financial regulators who are focused on larger banks, and 2) to recoup some of the regulatory costs associated with monitoring hawala transactions.

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