Hawala system is a universal system used by terrorists for transfer and remittance of illegal money. The system is considered to be fast in money transfer and cost-effective across the world as it can be used who cannot access traditional financial reach like the terrorists. Many countries have illegalized Hawala system while others consider it to be part of their gray economy. The USA treasury department faces the challenge of measuring the number of financial activities carried out by terrorists using this system because some countries have legalized this system to be part of their economy. Terrorists mostly use the Hawala system in illegal money transfer because it does not have a paper trail is efficiency and has anonymity making it difficult for terrorists to be tracked. Most of the terrorists acquire money for financing their terrorist activities from charity donations and informal money remittance through this system. The increase of terrorism funding through criminal networks made the United Nations council to implement legislation which would criminalize the financing of terrorist activities and illegal transfer of money. Therefore, financial institutions across the world are required to report any suspicious money transfer to help in tracking down terrorists.
The USA implemented a strategy of war against terrorists through making efforts to destroy terrorists’ financial networks. Although the US treasury department has frozen more than $ 140 million assets of the terrorists, experts have indicated that terrorists are using cash, laundering operations which are sophisticated and legitimate front firm to carry out their money transfers to avoid being detected. Hawala system is among the systems used by terrorists for transfer or remittance of money. The system is cost-effective and fast for transfer of money worldwide especially for individuals who are outside the reach of traditional financial department. In most countries, the Hawala system is illegal while in other nations the systems are considered to be part of the country’s gray economy. Therefore, the USA treasury department finds it difficult to accurately measure the volume of financial activities being carried out in the system. However, the Treasury estimates that the minimum figures used in the system are tens of billions of dollars. The system is mostly used for illegal money transfer because of its anonymity, efficiency, and lack of paper trail. The Hawala system has posed challenges to the anti-terrorist funding expert in the US treasury department because of the financial practices used in Muslim culture such as the informal remittance of money and charities’ donations.
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Anti-terrorists funding experts in the US treasury department face the challenge of combating financial crimes because terrorists use sophisticated systems such as the Hawala system to transfer their money. Terrorists are shifting their money using ordinary banking system or by use of shell firms and Hawala system which a traditional method of moving money making it difficult for the Treasury to track the money transfer and funding. According to Draca et al., (2011) financial crimes by terrorists have been widely spread such that 10% of the world GDP comes from laundered money. Despite the US treasury department increasing their efforts to tract financiers of terrorists and the immensity of modern financial systems in the world to cease money transfer and funding for terrorists, the government has been failing because of terrorists are using cash and sophisticated laundering operations to carry out their activities (Razavy, 2005). Use of the Hawala system is easy for terrorists as they only need a handshake and password to transfer their funds across the world.
Hawala system is posing challenging of tracking terrorism financial activities on Anti-terrorist funding experts in the US treasury department as terrorists are using this system to carry out illegal activities such as counterfeiting and smuggling to acquire revenue which is difficult to be tracked. Terrorists are transacting using cash on this system reducing the reliance of paper trail, and this has made it difficult to follow their financial activities. For example, funding of al-Qaeda group in Iraq is done through couriers who transport cash into the country, and the London attack of 2005 was funded entirely using money which cannot be traced (Draca et al., 2011). The Hawala system makes terrorists use domestic sources in funding and planning their attacks. For instance, the bombing of Britain was planned in the country by British citizens who raised the money required for the attack. Terrorist use cash and do not cross national borders, and this makes it difficult for the Treasury to track their financial activities.
Due to the increase in terrorists’ attacks, the United Nations council has come up with legislation aimed at criminalizing funding of terrorists and illegal money transfer. Financial institutions across the world are required to report any suspicious money transaction to help in developing a significant degree of world cooperation to track down financiers of terrorism (Romaniuk, 2010). More than 150 countries across the world have adapted to the act of reporting suspicious money transfer, and this has helped in endorsing the financial terrorism UN convention. States are required to take actions to reduce terrorism financing by using the recommendations issued by the intergovernmental body known as Financial Action Task Force as the basis of each country.
References
Draca, M., Machin, S., & Witt, R. (2011). Panic on the streets of London: Police, crime, and the July 2005 terror attacks. American Economic Review, 101(5), 2157-81.
Razavy, M. (2005). Hawala: An underground haven for terrorists or social phenomenon? Crime, Law and Social Change, 44(3), 277-299.
Romaniuk, P. (2010). Multilateral counter-terrorism: the global politics of cooperation and contestation. Routledge.
