Posts Tagged ‘hawala’

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FinCEN pooh-poohs knowing your customer

December 15, 2014

A federal financial crime agency has issued a statement imploring banks to continue or resume doing business with money services businesses (MSB’s)—many of which are hawala companies—despite the risks of hawala financing domestic and international terrorism. FinCEN’s statement stems in large part from pressure brought to bear by Democratic politicians, Somali activists, and well-meaning but misguided international charities who believe that remittances are an effective channel for humanitarian relief to corruption-plagued hot zones abroad. These parties fail to understand that remittances are fuel to the fire in places like Somalia where remittances are siphoned off by al-Shabaab to perpetuate the cycle of violence and misery in that country.

In the statement, FinCEN even goes out of its way to instruct banks that they do “not need to know the MSB’s individual customers” to remain compliant with know-your-customer provisions of the Bank Secrecy Act. This instruction seems at odds with years of federal regulatory admonitions for banks to know their customers.

Financial crimes analyst Kenneth Rijock does a wonderful job picking apart FinCEN’s pronouncement, posing the following observations about MSBs:

  1. They are frequently used by both money launderers, and terrorist financiers. This is a sad fact of life; laundrymen know that many MSBs are storefront operations, poorly run, and who would consider  accepting dirty money, to earn a handsome profit.
  2. They exist in jurisdictions where regulatory agencies are either non-existent, or unable or unwilling to enforce AML/CFT laws. Therefore, the MSB has no reason to have an effective compliance program.
  3. They may be actually owned, or controlled by, criminal elements; Look at Mexico.
  4. They are not like licensed financial institutions, the licensing requirements are often minimal, and corrupt government agencies, once paid off, are usually eager to qualify individuals who are unacceptable as NBFI operators.
  5. If a client cannot go to a bank in his or her jurisdiction, to send larger amounts of funds, it is often because their dodgy business is not wanted at legitimate financial institutions.
  6. MSBs in many countries are known for dysfunctional AML programs. Can we really expect US banks, who are held to best practices standards, to risk accepting money from them ?

Read Rijock’s full analysis here.

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Imran Khan says ditch the banks and use hawala

September 9, 2014

The ex-cricket star, political gadfly, and possible future prime minister of Pakistan Imran Khan is commanding his supporters and their families abroad to send money back and forth to each other through hawala, the traditional Islamic system of transferring money, rather than using conventional banks or wire transfer services.

This account comes from Dispatch News Desk on Aug. 23. As the article notes, Pakistan has officially sought to discourage hawala since it has been so often used to finance terrorist attacks, which is what makes Khan’s instructions disturbing.

“Use Hawala Hundi system for transfer of money to Pakistan”, says Imran Khan

The Chairman of Pakistan Tehrik-i-Inasaf (PTI) Imran Khan has directed his followers living outsides Pakistan to stop sending money to their families in Pakistan through banks(remittances)  and directed them to use Hawala Hundi system for transfer of money to Pakistan. He passed these directions while addressing his workers on Saturday night.

Chairman Pakistan Tehrik-i-Insaaf (PTI) Imran Khan on August 17, 2014 announces Civil Disobedience against sitting government asking his workers and followers not to pay any utility bills and taxes. Now he has directed to stop sending remittances to Pakistan.

Hawala or Hewala also known as hundi, is an informal value transfer system based on the performance and honour of a huge network of money brokers, primarily located in the Middle East, North Africa, the Horn of Africa, and the Indian subcontinent, operating outside of, or parallel to, traditional banking, financial channels, and remittance systems. This is the biggest channel being used by Arab and Afghan terrorists including Al-Qaeda to transfer money and finance their projects, therefore this channel is being discouraged by Pakistan since war on terror.

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Modi cocks gun and takes aim at illicit money

June 1, 2014

Newly elected prime minister Narendra Modi is reportedly putting the finishing touches on a new framework to tackle illicit money in India. While some of the new task force’s work will probably be geared toward ferretting out money allegedly stashed in Swiss bank accounts by political opponents, their objectives will also include the detection of hawala and terrorist financing.

Illicit money has been flowing into India from Kashmir and Pakistan for years under the Congress party’s nose. Modi’s BJP party must act as quickly as possible in order to begin reversing that.

Thanks to Sumon Chakraborty for sending this in from India Today:

Black money: Modi’s task force is almost ready

It could be the first big step from PM-designate Narendra Modi to bring back black money stashed abroad.

Sources in central agencies tell Indiatoday.in that a framework for a new task force to deal with black money has been prepared.

“Under the directions of senior officials of Department of Revenue, this task force has been created. It will be headed by the Financial Intelligence Unit,” said an official, requesting anonymity.

Central agencies such as the Enforcement Directorate, the Income Tax Department and Directorate of Revenue Intelligence are the members of the task force.

The task force will deal with black money derived from corruption, money laundering, hawala, terrorist financing or through off-shoring of wealth via tax havens.

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Recognizing the risks of Somali remittances

March 11, 2014

This piece is also appearing over at Terror Finance Blog today:

Last week, Bell State Bank in North Dakota announced that it would stop doing business with companies that remit money to Somalia.  The move follows decisions by Minnesota banks in 2011 to stop providing Somali remittance services, and an attempt by Barclays last year to cut off its partnership with Dahabshiil, a money transfer company with primary operations in Somalia.  The banks have been challenged in courts on both sides of the Atlantic, and advocacy groups have heavily criticized the banks’ decisions on humanitarian grounds.

Indeed, humanitarian considerations are of the utmost importance.  Unfortunately, money transferred to Somalia, particularly through Dahabshiil, all too often falls into the wrong hands and perpetuates the cycle of violence in Somalia.  Banks should stand fast in their original decisions, and here are five reasons why:

  1. The risks are real.  The frequency of cases involving Somalis in the West transferring funds to al-Shabaab over the last few years presents genuine concerns to financial institutions.  For instance, four men in California were found guilty last year of transferring money to al-Shabaab through Shidaal Express, a Somali hawala business.  Two Somali women in Minnesota were sentenced in 2013 for sending money to al-Shabaab through several remittance channels including local hawala dealers and Dahabshiil.  A Saudi-American was also indicted last year for wiring money to al-Shabaab.  In 2012, a man in London admitting transferring £8,900 to fighters in Somalia.  Danish intelligence revealed in 2012 that the equivalent of thousands of dollars a day is sent to terrorist organizations outside of Denmark—mostly to Somalia, and often unwittingly.  In addition to genuine risks on the ground in Somalia, Western banks have real reasons for concern that if they continue relationships with Dahabshiil, they could subsequently be fined by regulators at a future date if political winds change.  U.S. banks are surely aware, for example, that decisions on whether to fine, settle with, or prosecute banks with lax compliance programs have a great deal to do with the shifting political and prosecutorial priorities of whoever happens to be in charge at the Department of Justice and the financial regulatory agencies.  One official may take a very friendly view toward facilitating Somali remittances this year, but a different person will be calling the shots two years from now.
  2. The risks are not decreasing.  Gone are the days of 2012 when al-Shabaab appeared to be on the ropes in 2012 both financially and militarily.  Al-Shabaab was able to turn around its financial situation after the fall of Kismayo by cutting deals with occupying forces.  Al-Shabaab continues to profit from imposing taxes on commodities such as charcoal and sugar, and their role as ivory trade middlemen between poachers and buyers appears to be growing.  Al-Shabaab is still capable of carrying out devastating strikes such as the Westgate Mall attack and the recent assault against Somalia’s presidential palace that left 11 dead.
  3. Dahabshiil poses a unique risk.  Western readers should be aware of independent reports by the Somali diaspora news media that Dahabshiil finances terrorism.  According to reports by Waagacusub, Kalshaale, and Suna Times, Dahabshiil pays one-half million dollars twice a year to al-Shabaab. The payments allegedly resumed last year after a brief dispute during which Dahabshiil had ceased making payments.  One Guantanamo Bay detainee previously worked for Dahabshiil, and the presiding officer at a hearing for that detainee determined that his Dahabshiil branch transferred money for terrorism.  However, coverage of these allegations has been limited partly due from legal threats against journalists and online reputation management by Dahabshiil. Read the rest of this entry ?
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Illicit transfer news: recommended reading

February 20, 2014
  • Palestinian Islamic Jihad “receives between $100-$150 million dollars annually from Iran,” says an Iranian expert… more>>
  • FinCEN shuts down a Michigan-based hawala dealer who sent 8,000 wires to Yemen and never checked a single customer’s ID… more>>
  • We don’t know how much money is financing terrorism, and we don’t know how much it costs to combat its financing either, so how do we know if what we’re doing is working?  More>>
  • A New Jersey company illegally shipped $70,000 worth of protective gloves to Iranmore>>
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Fourth Somali sentenced in terror cash case

February 9, 2014

Ahmed Nasir Taalil Mohamud, a taxi cab driver in California, has been sentenced to six years in prison for transferring funds overseas to the terrorist group al-Shabaab.  His fellow conspirators–another cabbie, an imam, and a hawala dealer–were sentenced to longer terms previously.

Money Jihad readers will recall that this case illustrates how the Somali remittance industry is fraught with the constant risk of funding al-Shabaab.  U.S. and British banks that have ceased doing business with Somali hawala houses like Shidaal Express, Qaran Financial Express, and wire services companies such as Dahabshiil, are well-justified if not required by anti-money laundering and know-your-customer requirements to sever such ties.  The humanitarian benefits of sending money to Somalia are far outweighed by the high probability that the money will be directed to, diverted by, or extorted for al-Shabaab to buy weapons and carry out operations that ultimately harm more Somalis than such money helps.

U-T San Diego reports (h/t Arun Hindu):

Final sentence in Somali terror case

By Kristina Davis, Jan. 31, 2014

SAN DIEGO — An Anaheim cabdriver who raised funds to aid terrorists in his war-torn homeland of Somalia was sentenced Friday to six years in prison, where he will join three other San Diego Somalis who were sentenced in the scheme two months ago.

Ahmed Nasir Taalil Mohamud, 38, played the most minor role among the four men, said U.S. District Judge Jeffrey Miller.

Prosecutors say Nasir raised about $1,000 from other cabdrivers in Orange County to send to al-Shabab fighters, who are using violence to try to overthrow the East African country’s transitional government.

The fundraising was coordinated by Basaaly Moalin, a San Diego taxi driver in contact with al-Shabab overseas.

Moalin, a naturalized U.S. citizen, was given 18 years in prison — the longest term — when he was sentenced in November.

Mohamed Mohamed Mohamud, who used his influence on the local Somali community as a City Heights imam, got 13 years. Issa Doreh, who worked at a money transfer business the men used, received 10 years.

The men have already served three years and will be required to serve at least 80 percent of their terms.

Even though Nasir’s role was minor, Assistant U.S. Attorney William Cole said in court that Nasir and Moalin were talking about real people’s lives when it came to what the money would be used for.

“It was a serious offense,” Cole said.

Nasir and Moalin met years earlier in St. Louis, where Nasir had moved to work as a cabdriver, said his lawyer, Thomas Durkin. They then moved to California, where they could make more money…

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