By Steve Schifferes
Economics reporter, BBC News
The amount of money sent back home by migrants working abroad has grown rapidly in recent years - according to the World Bank it doubled in the five years from 2002, reaching at least $350bn.
But the mechanisms used to transfer money can also be used for money laundering, and are of increasing concern to law enforcement agencies.
Hawala is used across South Asia, Africa and South America
Some estimates suggest that half of all money transfers from migrants living abroad are done outside the formal sector - that is, banks or money transfer firms.
Of course, most migrant transfers are for legitimate reasons.
But the vast volume of informal transfers has made it much easier to hide illicit transfers, whether they relate to criminal activity or terrorist finance.
There are two reasons for the growth of the this informal sector.
The first is the expense of transferring money abroad for poor individuals.
The cost, especially for small amounts sent to nations with a less well-developed financial sector, can be as much as 20% of the sum, according to the World Bank.
Secondly, there are a number of countries, for example in parts of Africa and the Middle East, where the banking system is not highly developed and so cash transactions are common.
System of trust
As directly sending cash, or its equivalent in gold or diamonds, is potentially risky, this has led to the widespread use, in Muslim countries, of the hawala system.
Hawala is an informal system of money transfer based on trust, which uses a system of money brokers based throughout the Middle East, Africa and Asia, with links to others in major cities across Europe and North America.
Dubai is the hub of much of the global hawala trade
Under hawala, no money actually crosses international borders.
Instead, a system of complex swaps is employed, using food, fuel, electronics or gold as a way of balancing the books between operators - hawaladas - in different countries.
The OECD's Financial Action Task Force says these "alternative remittance systems" are widely used by terrorist finance, because of the "level of anonymity and rapidity" they offer, and for "cultural" reasons.
They say that they have the additional attraction of "weaker and/or less opaque record-keeping" and in many places "less stringent regulatory oversight".
This might particularly apply in failed states, such as Somalia, or large parts of Afghanistan.
Finding terrorist funding in the huge volume of international money transfers may seem akin to looking for a needle in a haystack.
The volume of normal transactions dwarfs the amount of money needed to carry out terrorist actions.
Weak governments make countries vulnerable to money laundering
The OECD estimates that the direct operational costs of major terrorist actions like the London and Madrid bombings were no more than $10,000 to $12,000 (£6,751 to £8,100).
This level of funding - or even the Bali bombing, estimated to have cost $50,000 - could easily be incorporated into the hawala system.
But the OECD says terrorist networks need other longer term funding to support their operations and logistics base - and so will also turn to money laundering, criminal activities, and the use of charities as conduits for money.
Regulators, particularly in Europe, are beginning to tighten up the supervision of all types of financial institutions, formal and informal.
An EU directive comes into force in 2009 that will compel financial companies above a certain size to become registered with the FSA and to put up bonds proportionate to their turnover or profit.
Gains and losses
At the same time, The World Bank has been pushing to lower the cost of formal money transfers.
Send money home: Big business - big competition
One possibility is to make more use of the postal system, which has the ability to create a global money transfer system.
Another new development could be the use of mobile phone systems to credit small amounts to users.
This would be particularly attractive in developing countries, where mobile phone use is growing and is much more dense than internet use.
Meanwhile, private agencies such as Western Union and Moneygram have expanded rapidly across the globe, and the money transfer business has proved highly profitable, growing by 6% per year.
There is no doubt that, overall, remittances make a positive contribution to economic growth in poor countries - although they might be better targeted.
So finding ways of improving transfers, while avoiding the risks of hiding money, could be useful for economic development.
And improving living conditions in these countries could be in itself an important antidote to the appeal of anti-Western militancy across the globe.