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Friday, 26 July, 2002, 15:26 GMT 16:26 UK
US expands dirty money investigation
Dubai gold market
Hawala brokers are common in Dubai's gold markets
The US government has made informal financial structures like the hawala money transfer system its top priority in its fight against money laundering and terrorist finance.

This is a clear policy shift for the US government.

The traditional focus was on dirty money shunted through the banking and financial system by the narcotics industry.

Unveiling the US Treasury's 2002 Money Laundering Strategy, under-secretary for enforcement Jimmy Gurule said that it was clear this focus had to change after 11 September.

The US Treasury argues that its work in combating traditional money laundering channels prompted the growth in the use of hawala.

Now more terrorists are trying to channel their money through commodities like gold, diamonds and tanzanite, Mr Gurule said.

He has ordered that a full investigation into this technique be prepared by March 2003.

Also near the top of the government's priority list are allegations that charities are used as fronts to fund terror operations.

Mr Gurule also acknowledged that the government still has little idea just how much money is involved either in financing terror or in the much larger field of drug money laundering.

All change

This year's strategy follows a year in which the field of financial law enforcement has undergone a radical change.

The attacks of 11 September meant governments around the world starting paying attention to a field they had barely noticed before, and new resources started to roll in.

Last year's document, for instance, barely mentioned terror funding, hawala, charities, bulk cash smuggling or the use of commodities trading.

Now, though, the race is on to penetrate the more informal ways of getting money from place to place.

"If we can shut down their financial structures, we save innocent lives," Mr Gurule said.

Under the counter

Hawala - also known as hundi or chop, depending on where it takes place - is a way of depositing money with a broker in, say, the US, whose partner in somewhere like Pakistan then delivers the same amount less commission in local currency to the beneficiary.

Both brokers will know each other well, so no paperwork needs to be kept and no money actually crosses a border. The brokers periodically settle up, often by exchanging gold.

But there are concerns that the new emphasis on informal methods of getting money from place to place could distract investigators from their efforts to clean up dirty money.

Unfair treatment

And some observers are worried that the US authorities will crack down too hard on hawala in general, rather than simply targeting terrorist finance.

Hundreds of thousands of Americans from overseas use hawala-like systems to remit money to relatives who live anywhere from the Middle East to the Pacific.

Western banking systems are too expensive for them to use - hawala brokers typically ask for only a couple of percentage points of the transaction - and can deliver money to places far off the beaten track.

One remittance system, Somalia's al-Barakaat, has already been shut down on suspicion of being used to fund the al-Qaeda terrorist network, but the only charges brought have been for operating without a licence, not for financing terror.

See also:

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