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Monday, 4 November, 2002, 09:44 GMT
UAE tightens 'terror money' rules
Dubai
The hawala system is vital to the UAE economy
The central bank of the United Arab Emirates has started to tighten regulations on the informal money transfer system known as "hawala", in an attempt to curb money laundering.

The bank said it would start registering and certifying hawala brokers from Monday, with the aim of bringing them loosely within its regulatory net.

Certificates, the bank said, "will be necessary to deal with banks or moneychangers and avoid any money laundering suspicion".

Hawala, widely used throughout the Islamic world, is a way of transferring funds from one country to another, by depositing money with a broker, whose overseas partner delivers the equivalent sum to the beneficiary.

Although most hawala is completely legitimate, the fact that no paperwork is needed, and no money physically crosses borders, makes it a potential financial channel for terrorist organisations.

Vital role

The UAE's certification process is an attempt to shed light on the opaque dealings of hawala brokers.

The brokers, the bank said, should provide details of their counterparties overseas.

They are also required to notify the authorities if they catch wind of any suspicious transactions.

It acknowledged, however, that over-heavy regulation could destroy a vital financial service - especially for Asian workers in the Gulf, who use it to send money home .

"The hawala system is very important to handle transfers of low-paid workers who are mostly illiterate," the bank said.

"It reaches remote places that are not serviced by normal banking networks."

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