“We need to redouble our efforts to combat the financial support networks of al Qaeda and the Taliban,” David Cohen, assistant secretary for terrorist financing, said in prepared remarks to the Council on Foreign Relations in Washington.

Al Qaeda and the Taliban adapt to our counter strategies quite quickly. Using hawala networks has been an alternative choice for moving terrorist funds around the world. Licensing hawala outlets is a way to control these networks; audit the legit ones and increase intelligence and investigations efforts on the ones that decide to stay underground. The Gulf region, Pakistan and Afghanistan will be the main areas that will see increased enforcement efforts.

“We may not be able to bankrupt al Qaeda, the Taliban or some of the lesser known groups operating in the border region between Afghanistan and Pakistan,” he said. “But through the coordinated, creative and relentless effort to attack their financial networks, we appreciably enhance our national security.”

The US Treasury already has attache offices in Kabul and Islamabad, and a resident advisor at the Afghan Central Bank’s FIU (financial intelligence unit). Another advisor will arrive shortly to assist in improving financial oversight, and there are plans to send advisors to Pakistan to help build the intelligence capabilities at the State Bank of Pakistan and improve law enforcement’s financial investigations.

http://www.cnbc.com/id/35123440

http://www.justice.gov/dea/pubs/states/newsrel/boston070208.html

http://www.poten.com/NewsDetails.aspx?id=10317976

This week an alleged hawala dealer suspected of having links with the terror ring of Dawood Ibrahim, the Taliban and al Qaeda has been arrested by the Indian Enforcement Directorate (ED).

Sources say Naresh Jain, 50, considered one of the world’s biggest drug money dealers with a daily turnover of $4 million, may have links with some top bureaucrats, politicians and business houses in the country.

“Investigations are [still] at a preliminary stage,” a senior finance ministry official told Daily News & Analysis.

Jain, who has been on the run since he jumped bail in a case in Dubai in 2007, was arrested on Thursday from his residence in west Delhi’s Pitampura colony. The ED had been tracking his movements for more than a year.

Jain reportedly owns 12 properties – commercial and residential – in Delhi alone.

ED officials found Rs60 lakh at his residence, besides documents about benami properties and bank lockers. Several of these documents pertain to his investments in stock markets, airlines and real estate. The ED has booked him under the Foreign Exchange Management Act and the Prevention of Money Laundering Act. Jain narrowly escaped a couple of years ago when an ED team raided his premises, probably in Delhi. He apparently attacked the sleuths and fled.

Jain was arrested by the Dubai police in 2007 after a global investigation called Operation Khyber Pass into drug trails from Italy and elsewhere led to him. Investigators from Italy, US and Britain stumbled upon Jain, known in the trade circles as “Patel”. But he jumped bail and started operating from Delhi, and Indian agencies have since been on the look-out for him.

Naresh Jain on Friday evening denied being involved in the alleged Hawala transactions and claimed he was basically a businessman but being unnecessarily trapped in the case.

” I have a factory in South Africa. I supply readymade garments in Afghanistan and Nepal. I talked to people in Pakistan in relation with purchasing rice. I have nothing to do with Hawala or Dawood Ibrahim,” Naresh Jain was quoted by Zee News as claiming.

About a year ago, ED formed a special anti-money laundering unit to track him down. His two brothers are also said to be involved in the hawala business, sources said.

Global investigations, led by the US Homeland Security, had revealed that drug money from around the world was flowing into Jain’s network, with a daily turnover of about $4 million. This money was further distributed to drug kingpins, including the underworld and terrorists, the earlier investigations had revealed. According to Indian officials, Jain could be involved in hawala operations worth Rs5,000 crore.

An Indian official told DNA that Jain has links with the Taliban’s drug cartel, and has been a key player in bartering proceeds from Afghanistan drug trade through hawala.

About four years ago, Jain is suspected to have made a major hawala transaction running into crores of rupees to key Dawood henchmen in the United Arab Emirates (UAE), a matter which is being probed by the ED.

Preliminary probe has found that Jain had established bases in several countries including the UAE, Nigeria, the UK, the US, Italy, Afghanistan, China, Pakistan, Bolivia and Congo. He is said to be close to leading business houses in Mumbai, Delhi, Ahmedabad and other prominent Indian cities.

How to counter hawala? Some countries try to regulate these financial services and make it a crime to operate a hawala network without a proper license. No matter what, we will need to use intelligence led operations to take the hawaladars down that do not want to be seen.

http://tinyurl.com/y8r5o5q

Hawala dealer with terror links held by Aditya Kaul, 9/26/09, Daily News & Analysis

One of the largest Hawala networks unearthed, 9/25/09, Hindustan Times

The case started by investigating over 300 CTR’s (currency transaction reports) that were filed against Alomari and Saeed by banks. The transactions involved amounted to over $14 million. Who says immigrant shopkeepers can’t make a decent living?

An confidential witness was put into the theater. He approached the shopkeepers in Saeed’s store and told them he wanted to move $12k out of the US. Saeed told him he knew people who could help. The charge would be $50 for every $1,000 sent overseas. Ofcourse the undercover informed Saeed in living colors that the money he would like to send abroad was in fact fraudulently obtained. That announcement did (of course) did not stop the hawala circus. The undercover was refered to a liquor store, where he handed over the money. The money ended up as planned on a bankaccount in Lebanon.  The suspects exchanged cash for bank checks which they mailed abroad to be cashed or deposited. In a true Hawala network you would not expect to see any CTR’s since the regular financial infrastructure is completely out of scope. This apparently was a part hawala, part regular financial transactions network. This could be a result of the small scale (amateur) of the operation. Since there probably was not enough money flowing (in) to settle all positions created by promising money abroad, the suspects actually had to transfer a lot of money abroad to make the transfers happen. They did so by using part of the regular financial network by getting money orders and checks to physically sent aboard.

An undercover agent presented himself as a Hezbollah member after the shopkeepers introduced the confidential witness to former Yemeni Army Intelligence officers that supported Hezbollah. The undercover asked the shopkeepers to transfer money to support Hezbollah to Yemen, which they did (or at least they thought they were). The money ended up in a bankaccount in Bahrein that was controlled by law enforcement.

Prosecutors in court said the three were caught in a sting operation in which they allegedly agreed to illegally transport the funds to what they thought were accounts controlled by the Lebanese militant group, which has been classified as a terrorist organization by U.S. officials. U.S. District Judge Mr Siragusa has ruled neither Hezbollah nor terrorism can be mentioned in the trial because they men were charged with money-laundering, rather than terrorism-related counts. The men’s indictment reportedly makes no mention of terrorism or Hezbollah.

This case again shows how hawala networks are part of shady money transfers all over the world. By having tighter controls in place in he regular financial industry, you will see a lot of the dirty money move over to the unregulated financial industry. These shopkeepers now know that law enforcement knows about hawala networks as well.

http://tinyurl.com/om3msw

http://www.nefafoundation.org/miscellaneous/FeaturedDocs/US_v_Alomari_Complaint.pdf

http://financialcrimeonline.com/archives/tag/hawala

 Last month an Al Qaeda’s top commander in Afghanistan urged Turkish Muslims in an audio message to send money to militants fighting coalition troops in the country, saying they are low on funds. Mustafa Abu al-Yazeed said many militants in Afghanistan are unable to fight because they lack the necessary equipment. “And we, here in Afghanistan, are needy of money,” said al-Yazeed. “And the reason for the weakness of the operations here is the inadequacy of equipment.” Al Qaeda training camps are no longer ‘all inclusive’ given reports that you have to buy your own Kalashnikov at rates around $400, quite a lot of money for local people. Allegedly some attacks planned by Al Qaeda on US guarded convoys did not occur because terrorists ran out of gas and could not afford a refill. Cutting the money flow off actually helps…

You will need a lot of funding to form a terrorist army and pay for all the training, weapons, equipment, food, travel etc. But a single terror attack? Any idea how much a bomb attack actually costs? Not a lot of money. If you do not consider the money needed for training and the wider infrastructure, a couple of thousand dollars will do.

11-September-2001: New York City attack: estimated costs: $ 500,000

 5-August-2003: Marriot bombing in Jakarta: $ 25,000

The Jakata Marriot bomber was trained in an Al Qaeda camp. The attack itself was also funded by Al Qaeda. A book that appears based in part on transcripts of Jemaah Islamiyah (JI)’s Hambali’s interrogation says Hambali (held in Guantanamo)  arranged for (equivalent of) $21,000 to be sent: $12,500 for operational expenses, $8,500 for Bali bomber families. Hambali’s younger brother, Rusman Gunawan, who was arrested in Karachi in September 2003, testified that Hambali had secured $50,000 from Noordin Mohammed Top to bring the cash from Dumai to Lampung. Gunawan was convicted to a 4 year prison term for ‘aiding and facilitating terrorism’ given his role to transfer the cash to Hambali.

11-March-2004: Madrid train station bombing: $ 10,000

7-July-2007 London bombing: $ 750

17 July 2009 Jakarta Marriott and Ritz Carlton bombing; yet unknown

We did read reports that one of the suspects, Noordin Mohammed Top, checked in in the Marriott before his team allegedly bombed it. He did not use a credit card but paid a $1.000 cash deposit. Top is known to hang around to see the bombs go off; he did so in earlier attacks. Noordin is presumed to have been shot by the Indonesian police but his death has not been confirmed yet.

We will not go into detail on how the money actually was spent to prepare for the attack. You can find those details on the net but we will not distribute a shopping list with price tags.

What do terrorism groups do to raise funds? Some sources mention drug trafficking, kidnapping, fraud. And of course they raise funds from wealthy individuals that support their cause. Given our efforts to block and seize all funds that are wired to terror related individuals and companies, expert mention an increase in hawala banking and cash movements. At least cash is easy to seize… if you find it. Let’s hope our efforts have blocked the larger flow of money to support terrorism. We will (do we?) have to accept that determined terrorists will probably find funds to execute their plans. We can just rely on the fact that cutting of the money supply will do the trick; stopping terrorism financing has to be integrated in the broader tactics of stopping terrorism. Experts believe Islamic militants in Afghanistan receive most of their funding from wealthy donors and charities in the oil-rich Gulf and from the illegal drug trade inside the country; a lot of that is out of our control (or to say the best: within limited control).

Douglas Greenburg, who studied the financing of US attacks as part of the 9/11 commission, told the BBC’s Dirty Money: “If you have someone who is working and depositing their pay cheques into the bank, and periodically withdrawing money and at night buying components for a bomb, constructing a bomb in their basement, what’s the bank going to do about that?”.

Homegrown terrorism is a threat we will have to deal with. From a terrorism finance point of view it is also one of the most difficult to tackle. Public private partnerships seem the best way forward but we still have a lot of steps to take there. Let’s hope Al Qaeda, JI and similar groups and their financiers keep getting hit by the crisis. Every setback brings an opportunity right? Even the crisis has its pro’s.

http://www.bloomberg.com/apps/news?pid=20601080&sid=aGoNQV5Wfezc

http://en.wikipedia.org/wiki/2003_Marriott_Hotel_bombing

http://financialcrimeonline.com/archives/282

http://www.historycommons.org/entity.jsp?entity=noordin_mohammed_top_1

http://financialcrimeonline.com/archives/33

http://www.magharebia.com/cocoon/awi/xhtml1/en_GB/features/awi/reportage/2008/10/17/reportage-01

http://vladtepesblog.com/?p=9046

http://www.nefafoundation.org/miscellaneous/nefa_talibanmoney0709.pdf

http://www.julyseventh.co.uk/media/archive/bombings-cost-just-500/index.html

http://en.wikipedia.org/wiki/September_11_attacks

http://en.wikipedia.org/wiki/2009_Jakarta_bombings

As with all crime, we know that you can earn a living by both being in crime and anti-crime (both at the same time is somehow difficult although not unheard of). The anti-pirating business has been reported to have a marketing interest to blow the seriousness of the pirating problem out of the water. Pirating consultants and soldiers of fortune target Somalia as the domain of their new lucrative business.

How about the “big time money laundering”? The BBC cited a UN report without some interesting facts:

• Maritime militia, pirates involved in actual hijacking – 30%

• Ground militia (armed groups who control the territory where the pirates are based) – 10%

• Local community (elders and local officials) – 10%

• Financier – 20%

• Sponsor – 30%

The UN report found the payments are shared virtually equally between the maritime militia, although the first pirate to board the ship gets a double share or a vehicle. And compensation is paid to the family of any pirate killed during the operation.

So if 50% of the proceeds go the sponsors and financiers; who are they? What is their exact role? These questions remain unanswered but are extremely important to tackle this type of crime effectively. Where the “hawala” system in Somalia will absorb most of the cash, the financiers and sponsors are probably the ones who will do more operations at the same time and are likely candidates to launder the money instead of just spending it locally. As with all crime combatting; an effective operation should ‘cover all bases’ and not just target the foot soldiers. There will be enough of them to replace them.

Some analysts – such as the Kenyan-based security consultant Bruno Schiemsky – say pirates have given as much as 50% of their revenue to the Islamist al-Shabab militia in the areas it controls. Al-Shabab denies these allegations.

We reported earlier on money trails via Dubai. Although there was only limited evidence to suggest that Dubai is the laundering gate to the rest of the world, there is no other publicly available information on these money trails. We will keep you posted.

http://news.bbc.co.uk/1/hi/world/americas/8061535.stm

http://financialcrimeonline.com/archives/213

http://financialcrimeonline.com/archives/25

European Union monitors were posted at the Egyptian border of Rafah to oversee controls related to smuggling cash by Hamas in 2006. For regular travelers entering Gaza through Rafah, sums over NIS 80,000 shekels ($19,000) must be declared. Diplomats estimated that Hamas, whose government is restricted by U.S. and EU sanctions, has managed to bring about $80 million through Rafah in 2006, obviously without declaring the funds. Hamas says the funds are used to keep the government it heads functioning. Israel says they are being used to finance militants.

Even now, Hamas officials are regularly ’caught’ while smuggling millions in cash. In February 2009, Egypt forced Hamas official Ayman Taha (part of a delegation visiting Egypt for cease fire talks) to deposit more then $11 million in cash in a bank in the Egyptian town of El Arish on Thursday after he tried to bring it into Gaza. Taha later crossed into Gaza without the money. In May 2009, an Hamas’ spokesman was stopped with around $800k in a money belt. He told reporters that “I was bringing a sum of money, which was donated by our people abroad for the Palestinian people, but unfortunately some people working at the crossing confiscated this money”. So on a regular basis, Hamas related individuals are stopped by Egyptian security forces while smuggling large amounts of dollars and euros into Gaza.

According to several sources, Hamas has two main routes to smuggle cash into Gaza. The first is having diplomats carry the cash back from their trips. The second is by transporting it unseen through an elaborate network of tunnels.  Israel bombed these tunnels in December 2008 and January 2009 to block smuggling of weapons and cash. How about a logical third financial route; not back to Gaza but to a bank in a loosely regulated country? Or even closer to home in a strictly regulated country?

Other than a logistic challenge to get cash to the right place at the right time, Hamas will for sure have the same problem in the non cash environment. Since Hamas and related individuals are on ‘freeze’ and sanction lists with financial institutions, they have to dig the equivalent of tunnels in the regular financial industry to place or move its funds unseen. Are we just as good (or bad) in detecting these wire movements as we are detecting the cash at the border? Better hope you are not involved in a tunnel that runs through your books; you will have the equivalent of an MOAB coming your way.

http://www.world-check.com/articles/2008/12/30/their-tunnels-flattened-what-will-hamas-cash-smugg/

http://news.bbc.co.uk/2/hi/middle_east/7873278.stm

http://www.metimes.com/International/2006/05/19/hamas_cash_smuggling_prompts_new_abbas_showdown/7050/

The Financial Times describes the case of Shahrom, an Iranian business man based in Tehran. He is doing well and has an investment business in Dubai. Transfering funds, especially in US dollars, from Iran to Dubai or the US will lead to problems because of sanctions and a nosy bank. “No problem”, according to Shahrom and other businessman in Iran.

Shahrom uses the hawala system to move the funds. The use of hawala systems in Iran has rocketed since the UN and US sactions programs against Iran. According to FT Sources, hawala bankers ask 1 – 1.5 % (and exchange rate spreads) for each transaction.
Roger Ballard, a hawala expert at Manchester University, estimates the hawala circuit in the Middle East and SE Asia to be $ 100 bn annually. Iranian businessmen claim that because of the sanctions programs, the euro has been dominating their deals lately.

The more risky the business, the higher the premium for doing that business will be. Hawala bankers see a booming demand, not in the least from clients that used to frequent the regulated financial sector. Within the hawala sector itself, some nice players will adept to these new demands in the market. It is this group that should be in the spotlight of intelligence and law enforcement agencies….

http://www.ft.com/cms/s/0/6ca69788-0a48-11dd-b5b1-0000779fd2ac,dwp_uuid=be75219e-940a-11da-82ea-0000779e2340.html?nclick_check=1

The hawala network (or Informal Value Transfer System as researchers tend to call it) has been in place for many many years and is probably the oldest form of banking. The last couple of years (especially after 911) law enforcement is increasing efforts to take down, or at least control, these systems because they provide an attractive, non regulated, alternative to people who want to avoid the regular banking system for whatever reason. List management and filtering can be one of these reasons (see previous post).

The harder you press the balloon on one side, the more it will bulge on the other ?

http://media-newswire.com/release_1066455.html
http://www.defac.ac.uk/journal/journal-downloads/defac_journal_hawala.pdf/view
http://usinfo.state.gov/eap/Archive_Index/Hawala_and_Other_Informal_Value_Transfer_Systems_How_to_Regulate_Them.html
http://www.imf.org/external/np/leg/sem/2002/cdmfl/eng/wilson.pdf