Posts Tagged ‘currency’

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ISIS manipulates currency in northern Iraq

March 10, 2016

Reuters says that the Islamic State of Iraq and Syria (ISIS) “rigs currency rates.”  That sounds sophisticated—activity you would expect from a central bank.  Once you read their article you find that ISIS is forcing currency dealers in Mosul to exchange fewer dollars for the same amount of Iraqi dinars.  That sounds more like an organized crime racket than public financial administration.  Either way you cut it, ISIS’s fighters are getting pinched with lower wages, which is a good thing.

Islamic State rigs currency rates in Mosul to prop up finances

Islamic State militants in the northern Iraqi city of Mosul are manipulating the exchange rate between U.S. dollars and Iraqi dinars to squeeze money out of local people as coalition bombers attack the group’s finances.

The U.S-led coalition has said that in addition to attacking Islamic State’s fighters and leaders it will go after financial infrastructure too.

Air strikes have reduced Islamic State’s ability to extract, refine and transport oil, a major source of revenue that is already suffering from the fall in world prices. Since October the coalition says it has destroyed at least 10 “cash collection points” estimated to contain hundreds of millions of dollars.

U.S. military officials say reports of Islamic State cutting fighters’ wages by up to half are proof that the coalition is putting pressure on the group.

Average pay has been cut from $400 to $200 a month. While wages for foreign fighters, which were between $600 to $800, have also been cut, it is not clear by how much, said U.S. Army Colonel Steve Warren, spokesman for the international coalition.

Yet the militants, who have near total control of the local economy, appear to have adapted to these setbacks in Mosul by introducing a new revenue stream.

The group earns dollars by selling basic commodities produced in factories under its control to local distributors, but pays monthly salaries in dinars to thousands of fighters and public employees, currency traders in Mosul told Reuters.

It earns profits of up to 20 percent under preferential currency rates it imposed last month that strengthen the dollar when exchanged for smaller denominations of dinars, they said.

“Daesh sells (the products) to traders in dollars, but it pays salaries in small denominations of dinars,” said an exchange bureau employee in Mosul, using an Arabic acronym to refer to Islamic State.

At the official rate set by the Iraqi government, $100 is currently valued at around 118,000 dinars.

In Mosul, the same amount costs 127,500 dinars when purchased with 25,000-dinar notes, the largest bill in circulation, according to the owner of a currency exchange bureau. The rate rise to 155,000 dinars when purchased with 250-dinar notes – the smallest bill available. Islamic State prefers the larger bills as they are easier to transport.

‘NOBODY WOULD RISK IT’

Three other currency traders confirmed those details. They all spoke to Reuters on condition of anonymity for fear of being punished by Islamic State. Security restrictions in areas the group controls prevented Reuters from independently verifying their accounts.

It was not possible to determine how much money Islamic State is making by controlling the currency market. It was also unclear if these practices extended beyond Mosul, the largest city under Islamic State control, to other territories in Iraq and Syria.

Parallel trading at more competitive rates is very limited, traders said, because Islamic State has threatened to confiscate the money of anyone who breaks the rules. If it happens, it is in complete secrecy.

“Nobody would risk it,” one of the traders told Reuters.

Islamic State, which is frozen out of traditional financial institutions by international sanctions, operates a cash economy and controls most means of production, including factories producing cement, flour and textiles…

 

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Al Qaeda debuts new currency

March 2, 2014

Osama Bin Laden bill

Reportedly, Al Qaeda in Iraq (ISIL) is circulating its own one hundred “Islamic” pound note in western Iraq with a picture of the Twin Towers burning on 9/11 and a portrait of Osama bin Laden.

The new bills are quite a curious development considering that Islamists normally regard paper currencies as unclean “infidel” currencies invented by non-Muslim imperialists.  Islamists prefer gold dinars and silver dirhams such as those used by Muhammad according to traditional Islamic texts.

ISIL may have chosen a denomination of 100 because of the popularity of U.S. $100 bills in Iraq, where they are nicknamed “ghosts” because of Iraqi perceptions of Benjamin Franklin’s sprectral appearance.

Presumably, the new currency is more of a publicity stunt than an actual, working currency that could be used to pay the wages of their fighters.  The money would seem to have limited usefulness to ISIL’s men and their families, because it cannot be exchanged or used to purchase goods beyond ISIL’s territorial control.

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India’s currency change combats counterfeiting, but backdoor still wide open for money laundering

February 28, 2014

An email from our old friend Puneet aprised us to a new initiative in India to replace old currency notes with new notes with enhanced security features.

The reason for the change is speculated by many, including the BBC, to reduce the flow of black money (including undeclared, untaxed, counterfeit, and laundered money) through India’s economy.

Indeed, counterfeiting is a national crisis in India, and the new security features on the bills should help reduce the ability of counterfeiters to replicate the notes.

But in terms of getting illegally acquired but genuine notes off the street, this program doesn’t do much to cleanse the economy from the scourage of black money.

Live Mint points out that anybody who wants to exchange their old bills for new ones will be able to do so, and they won’t have to divulge their identities:

…If one looks at the RBI announcement, it is clear that the old currency notes can be exchanged for new ones at any bank branch from April to June 2014 without any questions being asked as to the name of the person giving the notes, her Permanent Account Number (PAN), address, etc. One can exchange the notes even at branches where one does not have a bank account. It is only after 30 June that one would have to give the name and PAN to exchange high denomination currency notes. Therefore, any person having undisclosed cash in her possession can easily exchange the old currency notes till June 2014 without disclosing her identity…

Also, Money Jihad notes that there doesn’t seem to be any provision in the new currency roll-out for bank tellers to report unusual amounts of cash that are brought in for exchange, or for them to report exchanges that they suspect are being made on behalf of undisclosed third parties.  Officials should move to incorporate such safeguards.

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Al-Shabaab touts its Ramadan social services

August 6, 2013

Aiming to build its credentials as a charity, the terrorist group al-Shabaab has posted staged photos online of food and money that it claims to have distributed to Somali villagers during Ramadan.

Youngsters look doubtful after guerrillas give them money

Notice that only the smallest child looks happy

Do you really think al-Shabaab’s gunmen are going to hand out wads of cash to Somali children and allow them to walk back to their huts to give it to their parents?

Somalia Newsroom explains:

…Amid the likely competition between al-Shabaab factions over support from local communities, forces loyal to top leader Ahmed Abdi Godane continue efforts to “win hearts and minds.” In photos published online, al-Shabaab can be seen giving cash handouts to poor families in Galhareeri (Galgaduud region)–with children serving as the recipient to optimize perceptions of the group’s charity.

In the Lower Shabelle town of Qoryooley, al-Shabaab’s dawa activities involved handing out sacks of food to the community.

Other photos of Qoryooley showed ongoing construction, social services, and steady life. The intent perhaps is to highlight the apparent normalcy of the town in contrast with the alternating pivot of recovery and instability in Mogadishu (of which al-Shabaab is a major but not sole contributor)…

These efforts are similar to those of Hamas, IHH, Qatar Charity, RIHS, JuD, and a dozen Saudi-backed Islamic relief agencies that spread radical Islamist medicine with a spoonful of charitable sugar worldwide.

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Wednesday word: digital cash

March 13, 2013

Before there was bitcoin, there's the larger concept of digital cash

Julian Gaspar defines digital cash as “an electronic payment system that represents currency in an electronic format that moves outside the normal network of money”.*

Because it operates outside the conventional currency system, digital cash may allow for greater freedom in transactions.  Critics point out that transactions in such systems are anonymous, difficult to trace, and can be used for criminal activity.

* Gaspar, Julian, Introduction to Business (Boston:  Houghton Mifflin Company, 2006).

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Sheikh: “The plan is to bring down the whole world of paper money”

December 21, 2012

Prominent Muslim scholar Imran Hosein has once again called for an end to fiat currencies, declaring that “paper money has already done its job of ripping off mankind.”

The remarks made in March, and uploaded to Youtube just recently, are the latest in a lifetime of rants against cash by Hosein, a virulently anti-Semitic graduate of Al-Azhar University who served as the de facto Muslim chaplain at the United Nations for 10 years.

Hosein believes that only gold dinars and silver dirhams used in the days of Muhammad have innate value.  He has falsely stated before, as in this video, that Jews “control the banking system,” and that “Zionists” can simply wipe out your bank accounts with the click of a button.  Hosein’s deep antipathy towards electronic banking (he loves talking about “invisible money” in “machines without minds”) feeds into Muslim fears, paranoia, and conspiracy theories.

How will Hosein’s “plan” to destroy paper money be achieved?  Does he mean that tangible money will simply be digitized, or does he have something more sinister in mind to bring down the Western currency system?

Keep in mind that Iran is actively engaged in cyber-attacks against major U.S. banks.  Recall that sovereign wealth funds from the Middle East may have played a role in the market collapse in 2008.  Remember that the 9/11 hijackers struck the World Trade Center, a locus of American financial might.

The Islamists are telling us their next objective:  “The plan is to bring down the whole world of paper money.”  Will we have the guts to listen and respond in time?

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Slick ad tells Muslim youth to use gold coins

May 11, 2012

A new commercial uses images of Muslim young ladies buying food at a halal cafeteria with silver coins.  Viewers are urged to use the silver dirham coins and gold dinars in order to “revive the Sunnah”:

The Islamic world is replete with examples of the move toward silver and gold coins, and this is just the latest.  Indonesia recently introduced a standardized dinar and dirham system to run alongside their paper currency as an option for Indonesians.

Gold advocates and Muslim financiers make repeated claims of gold and silver having “intrinsic value.”  Pardon me, but can you eat gold and silver?  Can you drink it?  Will it keep you warm in winter and dry in the rain?  No—only the things you can buy with gold and silver can do that for you.  And guess what?  You can buy the same things with paper currency.

In this sense, “fiat” currency isn’t much different from “fiat” metal.  But metals are susceptible to fluctuations in the global market (like oil) and could potentially be a less stable system upon which to base a national monetary system.

Turning back the financial clocks to the dinar and dirham may make some Western nostalgists, goldbugs, and paranoiacs envious or concerned that the Islamic world is taking what they feel is a more sensible approach to money.

But there is nothing to be envious about.  Returning to gold and silver will not help the economies of the Islamic world.  If anything, it will make them even less efficient and less competitive in today’s currency-based financial world.