On Aug. 5, the State Department has released its annual country reports on terrorism. Among the findings are that hawala (the money transfer system established by Islamic law) in Syria and Pakistan continue to pose significant international security risks. Excerpts follow:
Unlicensed informal hawalas (money changers) still operated illegally in parts of Pakistan. The informal and secretive nature of the unlicensed hawalas made it difficult for regulators to effectively combat their operations. Most illicit funds were moved through unlicensed operators, including through bulk cash smuggling.
Syria’s financial sector remains vulnerable to terrorist financing. An estimated 70 percent of all business transactions are conducted in cash and as many as 80 percent of all Syrians do not use formal banking services. Despite Syrian legislation requiring money-changers to be licensed by the end of 2007, many continued to operate illegally in Syria’s vast black market, which is believed to be as large as Syria’s formal economy. Regional “hawala” networks remained intertwined with smuggling and trade-based money laundering – facilitated by corrupt customs and immigration officials – raising significant concerns that the Syrian government and business elites could be complicit in terrorist financing schemes.
The report also indicates that additional work needs to be done against hawala and terrorist financing in Saudi Arabia, Gaza and the West Bank, and the United Arab Emirates.