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Hawala: Swifter than SWIFT?
By Arnaud de Borchgrave
Washington Times
July 1, 2006

President Bush was swift to react angrily against the New York Times for exposing U.S. monitoring of SWIFT (Society for Worldwide Interbank Financial Telecommunications) as a suspected conduit for the transfer of terrorist funds. Former Attorney General Edwin Meese accused the newspaper of giving "aid and comfort to the enemy," which is tantamount to treason. Belgian and European authorities also reacted angrily against the Bush administration for tapping SWIFT's Belgian-based supercomputers without the green light of a Belgian judge. The hullabaloo generated much heat and little light.

SWIFT is the heart and lungs of the global banking industry, operating a secure electronic exchange service for fund transfers between some 7,800 banks in 200 countries. The network routes a staggering $6 trillion daily -- America's annual GDP is $10 trillion -- between banks, brokerages, stock exchanges and all manner of financial institutions. Its banks of supercomputers process orders at the rate of several trillion moves per second.

The National Security Agency's electronic vacuum cleaners that suck in over a billion bits of information daily, in scores of languages, are the only ones capable of doing the heavy sifting of a gazillion accounts. The New York Times also broke the story of NSA's global eavesdropping program, which allows NSA's search engines to browse back to the U.S. and figure out the American end of a conversation with a terrorist suspect in another continent.

The U.S. intelligence community is compelled to obey U.S. laws in the United States, but is authorized to operate illegally in the rest of the world. The SWIFT disclosure case is particularly sensitive in European capitals as the EU and the U.S. are at odds over the way some civil liberties were curtailed in the global war on terrorism. EU has also taken the U.S. to task over the practice of "renditions" and the abduction of suspected terrorists on European soil and then flying them to countries that conduct torture.

SWIFT says it has done nothing wrong by responding to compulsory subpoenas from the Office of Foreign Assets Control of the U.S. Treasury Department. The electronic clearing house also said it was a transatlantic organization with branches on both sides of the Atlantic. But the nerve center is in Belgium.

Mr. Bush's denunciation of the New York Times seemed a tad hyperbolic. Transnational terrorists have studiously avoided getting tangled in the ones and zeros of electronic interception in favor of a time-honored, time-tested, interception-proof system known as hawala (Arabic for "transfer" or "wire"). It's an informal funds transfer (IFT) mechanism, swifter than SWIFT that leaves no paper or digital trail.

It is based entirely on trust between two individuals separated by thousands of miles. Hawala is much faster than a normal bank transfer. Originally devised as protection against the dangers of traveling with gold and precious stones and other forms of payment on roads prowled by bandits, today's system is transnational.

How would an al Qaeda operative transfer funds from, say, Quetta in Baluchistan, to Queens in New York? He/she would hand a specific amount to a "hawaladar" who then calls a trusted friend at the other end of the transaction to hand over the equivalent amount to the person (man, woman or child) who gives him the coded word or phrase already mentioned, either by e-mail, fax or phone, or VOIP (voice over internet protocol).

Two hawaladars who work together -- with two-way traffic -- settle up their accounts at the end of a fiscal year. If one owes the other more than he/she transferred, the balance is frequently settled by putting something of value in a bank's safe deposit box, or in goods and services. Hawaladars charge lower than bank fees and use the exchange rate spread between countries to generate more income. The system is also used for settling debts through import-export transactions.

Hawala transactions are usually initiated by emigrant workers on contract in Saudi Arabia or the emirates of the Gulf to their families in Pakistan, India, Bangladesh and the Philippines, or to Muslim communities in the Middle East, North Africa and Western Europe. It is fast, efficient, traceless, sans banking fees. Funds are often delivered FedEx-style door-to-door within 24 hours by a hawaladar who has quick access to villages in remote areas.

Hawalas are also based on kinship, ethnic ties, village solidarity and personal relations. Even wealthy parents in developing countries use the system to transfer university tuition fees and pocket money to their children studying in developed countries.

Overlooked in the secret program to keep tabs on the trillions of dollars that whiz through SWIFT in Belgium is the low cost of major al Qaeda and copycat terrorist incidents to date: an estimated $30,000 for the 1998 U.S. Embassy bombings in Dar es Salaam and Nairobi; $10,000 for the 2000 attack on the USS Cole that killed 17 U.S. sailors and immobilized a $1 billion warship for two years with a repair bill of $250 million; $500,000 for the September 11, 2001 attacks on the Twin Towers and the Pentagon; $50,000 for the attacks on commuter trains in Madrid March 11, 2004; and $35,000 for the 2005 attacks on a London bus and subway train.

Such amounts would have been pepper-corn change among SWIFT's trillions. For al Qaeda, hawala is fast, reliable and secure.

Arnaud de Borchgrave is editor at large of The Washington Times and of United Press International.

http://www.washtimes.com/commentary/20060630-084943-8151r.htm

Stepping back in time on same subject of Hawala:

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In Praise of Hawala

LFET ^ | J. Orlin Grabbe 5-10-02
In Praise of Hawala by J. Orlin Grabbe When I was teaching at Wharton, I remember one student who was amazed that he could "wire" his Treasury bill from a bank in Chicago to a bank in Manhattan. Of course there was no mystery to the process. Treasury bills only exist as accounting entries on the books of the Federal Reserve: there is no physical token or quality printed document involved. The bank in Chicago was the registered owner of the T-bill on the Fed's books, and it simply sent instructions to the Fed to turn the T-bill over to...

http://www.freerepublic.com/focus/f-news/681310/posts

Man guilty of running unlicensed 'hawala'

Portland Press-Herald ^ | May 1, 2002 | DAVID HENCH
A man who helped establish an international money-transfer business in Portland - profits from which may have financed terrorists - faces up to 10 years in prison after being convicted Tuesday of running the business illegally. Mohamed Hussein, 33, was convicted of the misdemeanor in U.S. District Court in Boston after three hours of jury deliberations. His brother, Liban Hussein, 31, who faces extradition from Canada, is accused of the same charges.Hussein's conviction may be the first under the U.S. Patriot Act passed in the aftermath of the Sept. 11 terrorist attacks on the World Trade Center and Pentagon, according to...

http://www.freerepublic.com/focus/f-news/676538/posts

Kashmir: Hawala funding of terror exposed

Hindustan Times ^ | March 26 2002 | Rashid Ahmad and Vishal Thapar
The arrest of Jammu and Kashmir Liberation Front (JKLF) chief Md Yaseen Malik on Monday has re-focussed attention on the foreign funding of terrorism in Jammu and Kashmir. Police and intelligence agencies reckon that the largest recipient of foreign funds is the All Party Hurriyat Conference (APHC), the 23-group separatist conglomerate. J&K Police have registered several FIRs charging senior Hurriyat leaders with receiving foreign monies through the hawala route, and some Rs 200 crore are believed to have been pumped into Kashmir from abroad in the dozen years of armed militancy. Pakistan and Saudi Arabia are believed to be the...

http://www.freerepublic.com/focus/f-news/654002/posts

U.S. begins to probe hawala deals in Gulf

Gulf News Online (Manama) ^ | 1-17-02 | Latheef Farook
Hawala and other alternate remittance channels used by millions of Asian expatriate workers in the GCC and even in the West, to send money home, is being probed by officials combating terrorist financing, confirmed a top U.S. Treasury Department criminal investigator. "The alternative system poses the biggest challenge to the U.S. Government and the authorities are placing all institutions working on U.S. soil under the ambit of the regulatory regime, especially in the post-September 11 era," stated John Cassara, senior special agent in the U.S. Treasury Department's Financial Crime Enforcement Network. Preliminary discussions on dealing with hawala have already ...

http://www.freerepublic.com/focus/f-news/610320/posts

The world of the Islamic Hawala. The secretive, illicit system of international money transfers

netcrucible.com ^ | Tuesday, September 25, 2001 | Not sure
What is a hawala? It's a secretive, illicit system of money transfers that skirts our banking system and reporting requirements. Squeeze the Lifeblood. The President said that money is the lifeblood of terrorist operations, and the coalation against terrorism are going to starve the terrorists by cutting off their cash supply. Controlling this flow of lifeblood will be far more difficult than controlling airport and stadium security here at home. The flow is heavily dependant on an Islamic concept called Hawala. The rules under Shi'a Islamic law are described here by Grand Ayatollah Lankarani. Hawala creates a ...

http://www.freerepublic.com/focus/f-news/568090/posts

Paper Trail Stops Dead at Hawala

CNN ^ | Oct. 11, 2001 | Nick Easen
"Currency can be as lethal as a bullet," U.S. Treasury Secretary Paul O'Neill told the House of Representatives Financial Services Committee. Illegal in most countries, including Pakistan, an honor-bound remittance system based on trust, family and friends is a low-tech, informal form of wire transfer.

http://www.freerepublic.com/focus/f-news/546004/posts

'Hawala' May Defeat Efforts to Choke Terrorist Funds

Bloomberg ^ | 10/01/01 | Ravi Velloor
Singapore, Oct. 1 (Bloomberg) -- Once a month, a maid named Dammika hands a shopkeeper in Singapore's Little India about $115, most of her monthly salary. The next morning, her father enters a jewelry store in central Sri Lanka and gets the money.

http://www.freerepublic.com/focus/f-news/536783/posts