10.1.1.138.333 (1)

Introduction September 11 and terrorist financeNot long after the terrorist attacks on the World Trade Centre on September 11 2001hawala became identified in the news and in political discourse as an importantchannel through which the terrorists had been able to finance their acts Hawala is aterm for informal financial networks originating from the Arabic root h-w-l whichmeans `to change or `to transform (Passas 1999 page 11) Hawala networks arebelieved to have originated in Asia centuries ago to provide safe money transfers fortraders traveling along the Silk Route The modern development of hawala is con-nected to the 1947 partition between India and Pakistan when exchange controlsmade it illegal to transfer money between the countries and hawala filled the gap(Miller 1999) Hawala networks arrange for the transfer of money domestically orinternationally and may sometimes arrange credit(1) Although there is much talk ofthe ùnderground economy or the `black market hawala transactions are not illegal inmost countries(2) In principle hawala transactions are not very different from inter-national money transfers done by `normal financial institutions and hawaladars(hawala brokers) in Western cities do not operate underground but often openly

Hawala discourses and the war on terrorist finance

Marieke de GoedeocircPolitics School of Geography Politics and Sociology University of Newcastle Newcastle uponTyne NE1 7RU EnglandReceived 14 December 2002 in revised form 17 April 2003

Environment and Planning D Society and Space 2003 volume 21 pages 513 ^ 532

Abstract In this paper I argue that the informal hawala money-transfer networks which were made totake much of the blame for terrorist financing in the wake of the September 11 attacks are notùnderground banking systems but are connected to Western banking in a myriad of ways I arguethat negative stereotyping of hawala in press and policy discourses has implicitly constructed Westernbanking as the normal and legitimate space of international finance and has deflected calls forregulation of Western investment banking I discuss how hawala is connected to the financialexclusion of migrant workers in the West In the war on terrorist finance discourses of hawala haveled to the underestimation of the complexity of cutting off terrorist funding while criminalisingremittance networks

DOI101068d310t

(1) Hawala is the term for financial networks which is commonly used in India hundi is commonlyused in Pakistan Informal money-transfer networks of this kind have also developed in China(Fei chien) Thailand (Phoe kuan) and Latin America (Casa de Cambio) (Passas 1999 pages 9 ^ 12)Nikos Passas suggests that the term ìnformal value transfer system is more accurate than hawalaalternative banking or underground banking which can all be found in Western policy and mediadiscourses because ` it is not always underground banking is rarely involved if ever and it is not asingle system (page 9) Although I agree with Passas on this I have chosen to use the term hawalathroughout this paper because I am interested in discussing how discourses of hawala haveinfluenced policy decisions in the wake of September 11(2) India is a notable exception (Cottle 2001)ocirc New address Faculty of Humanities University of Amsterdam Herengracht 182 1016 BRAmsterdam The Netherlands

advertise in the local press (Passas 1999 page 20)(3) However the defining aspectof informal money transfers is that they escape the formal accounting procedures ofnational governments and international institutions (Choucri 1986 page 697) Incontrast money transfers done by international banks are formally recorded in therespective countries balance of payment figures

In the wake of September 11 hawala became discussed in the international press as` a banking system built for terrorism (Ganguly 2001) One of the first articulations ofthis argument can be found in a September 26 article in the NewYork Times by WilliamWechsler a former US Treasury official and director for Transnational Threats on theUS National Security Council during the Clinton administration `Ìt is wrong to thinkof al Qaeda as being financed primarily by Mr bin LadenWechsler (2001 page A19)wrote ` More important is al Qaedas global network of financial donors Muslimcharities legal and illegal businesses and underground money transfer businessesThe image of a vast unregulated and underground money-transfer network atal Qaedas disposal became widespread in news reports after the attacks In Timemagazine hawala was described as an ` international underground banking systemthat allows money to show up in the bank accounts or pockets of men like hijackerMohammed Atta without leaving any paper trail (Ganguly 2001) Similarly the FarEastern Economic Review wrote that Asias ` vast underground banking system was` the likely channel bin Laden used to transfer his cash (Granitsas 2001)

Similar discourses of hawala can be found in government statements and policydocuments In the Hearing on Hawala and Underground Terrorist Financing Mecha-nisms before the US Senate in November 2001 Chairman Evan Bayh (2001) said in hisopening statement

` In this war against terrorism one of the most critical battles will take place not ina foreign land but in the financial world as we seek to paralyze terrorist activitiesby cutting off the head of groups like al Qaeda One system which bin Laden andhis terrorist cells use to covertly move funds around the world is through `hawalaan ancient informal and widely unknown system for transferring money _Although most Americans have never heard of hawala that system almost certainlyhelped al Qaeda terrorists move the money that financed their attack on the WorldTrade Center and the Pentagon

When the Bush administration closed down a number of US-based hawaladars onNovember 7 2001 President Bush stated ` The entry points for these networks maybe a small storefront operation _ But follow the network to its centre and youdiscover wealthy banks and sophisticated technology all at the service of mass murder-ers By shutting these networks down we disrupt their murderous work (quoted in(3) Hawala works roughly as follows if for example a migrant worker in the USA wants to sendmoney to family in Pakistan the worker can bring the money (for example US $100) to ahawaladar in the USA The US hawaladar (hawaladar A) will send a message (by telephonefax or e-mail) to his or her contact in Pakistan (hawaladar B) Hawaladar B then hands overthe money (minus a commission) to the migrant workers family (in Pakistan rupees) after thePakistani family member has identified himself or herself (not necessarily through formal identi-fication such as a passport but with the knowledge of for instance a code word) The transactionmay be completed in as little as twenty-four hours The hawaladars profit by charging a commissionfor the transfer

Hawaladar Awill now owe the amount of the transfer to hawaladar B This debt will be settled inthe long term but may remain outstanding for a while Money transfers between the hawaladarsin the opposite direction (for instance by parents sending money to children studying abroad) mayoffset some of the debt Eventually the hawaladars may settle their debt through the underinvoicingor overinvoicing of shipped goods (that is hawaladar A sends goods to hawaladar B but chargesUS $100 less than the actual value of the shipment) The hawaladars may also settle their debtsthrough international bank transfers or by payments in cash or gold (Jost and Singh Sandhu 2000)

514 M de Goede

Gordon and Powell 2001) As a final example a Harvard Law School paper onterrorist financing writes of hawala ` These systems have generally survived to thepresent day _ because of the benefits they offer for illicit finance _ Hawala systemshave also been linked to narcotics trafficking in human beings terrorism corruptionand smuggling (Gillespie 2002 pages 8 ^ 9 compare also Thachuk 2002)

In press reports and political discourse hawala became stereotyped as taking placein shabby smoky dark and illegal places For example Michelle Cottles search forhawala offices in Washington which was published in both The New Republic mag-azine in the USA and The Guardian newspaper in the United Kingdom opens with thefollowing setting

`The landing is dark and the door to the officeoumlostensibly a travel agencyoumlisunmarked save for a sticker proclaiming Ì love Pakistan Outside on the streetsmall clusters of men lounge against cars and in doorways calling out to passers-byInside one rickety flight of steps up from Trinas Hair Gallery the air is silent andstale I obey a tiny sign faintly visible in the gloom instructing visitors to `ringbell Then I waitouml10 20 40 secondsoumluntil a pair of gold-rimmed glasses appearsin a small arched window above the door I wave and smile A lock clicks and thedoor opens several inches dropping a thin streak of light onto the dingy greencarpet Ìm looking for the money transfer place I explain my voice trailing offas a middle-aged Pakistani gentleman eyeballs me wearily (Cottle 2001)

The investigations of Time reporter Meenakshi Ganguly (2001) also took her to a` smoked-filled office this time in the ` labyrinthine depths of old Delhi wherethe lanes are too narrow for even a rickshaw [and] men drink tea and chat in shabbyoffices In the New York Times it is reported that in a Kandahari bazaar ` manyhawala dealers are concentrated in a five-story concrete building that resembles abunker its interior dark and its offices lighted by dim bulbs (Frantz 2001)

I argue that stereotyping hawala as a dark and illegal space has implicitly con-structed Western banking as the normal and legitimate space of international financeand has deflected calls for regulation of Western investment banking Meanwhile morethan two years from the World Trade Centre attacks a nuanced and integrated under-standing of the meaning and functions of hawala within global financial networks isstill lacking In this paper I take some first steps towards offering such an under-standing Rather than being a parallel system or an ` underground banking network(Miller 1999) hawala is connected to the institutions and practices of Western bankingin a myriad of ways In particular I discuss how hawala is connected to the financialexclusion of migrant workers in the West In the war on terrorist finance discourses ofhawala have led to the underestimation of the complexity of cutting off terroristfunding while criminalising remittance networks

In the first part of this paper I examine the portrayal of hawala in theWestern pressand policy discourses and argue that an understanding of financial history demonstratesa close kinship between hawala and Western banking In the second part I discusshawala in relation to financial exclusion in the West and critically examine Bushsfinancial-policy measures that followed the September 11 attacks I conclude by dis-cussing how the analysis offered here supports alternative policy measures to the onestaken in the war on terrorist finance

Hawala trust and financial historyOne of the main issues to be noted in the Western press and political discourses whichsupposedly distinguishes hawala from Western finance is the fact that hawala is basedon trust and reputation and leaves no records of its transactions The image ofinternational financing ` without leaving any paper trail (Ganguly 2001) became

Hawala discourses and the war on terrorist finance 515

ubiquitous in reports on hawala Hawala it was noted in the Far Eastern EconomicReview is ` a system based on trustoumland cashoumlthat leaves almost no paper trail_ Its better than the modern banking system and its untraceable (Granitsas 2001)In December 2001 Kenneth Dam Deputy Secretary of the US Treasury wrote in theFinancial Times that the international coalition against terrorism should pay attentionto hawala in its efforts to ``[hunt] down dirty cash because ``terrorists move moneythrough the hawala system an ancient trust-based way of moving money leavingvirtually no trace (Dam 2001) Àll that hawala requires is trust Time magazinewrote ` and that ironically is why it thrives in the underworld (Ganguly 2001) Asone hawala broker told Ganguly in response to the question of whether hawala debtsare ever denied or defaulted ` No one cheats The small gain would not be worth thebigger price You will lose respect and for a man honour is his most importantasset (Ganguly 2001 compare also Behar 2002 The Economist 2001)

Leaving aside the question whether hawala is really paperlessoumlCottle (2001) forexample notes the use of a `fat ledger by the hawaladar she visits in Washingtonoumlitcan be debated whether the principles and practices of hawala are really that differentfrom those of Western banking Reliance on trust and reputation which are nowportrayed in the press as deviant aspects of informal and criminal finance have alwaysplayed an important part in Western banking itself The etymological origins ofthe very concept of credit on which Western banking is based illustrate this point(de Goede 2000 page 60) Credit from the Latin credere signifies belief faith andtrustoumla person being worthy of trust or having the reputation to be believed Origi-nally as Craig Muldrew (1998 page 3) has documented to be a creditor was possibleas a function of social and moral standing ` credit was extended between individualemotional agents and it meant that you were willing to trust someone to pay you inthe future _ [T]o have credit in a community meant that you could be trusted to payback your debts Similarly Nigel Thrift documents the historical importance of the` narrative of the gentleman to Londons financial district This was one way in whichthe worth of people and practices was assessed it was `à widespread narrative basedon values of honour integrity courtesy and so on and manifested in ideas of how toact ways to talk [and] suitable clothing (1994 page 342)

But it is not just early-modern credit which was generated through social anddiscursive networks of reputation and authority to be progressively displaced bymodern scientific methods of credit creation Trust reputation and authority are atthe heart of the operation of international finance today Anthropologist AnnaHasselstrolaquo m (2000 page 261) for example found in her interviews with financialtraders and brokers in New York and London that they often use ``the concept of trust when reflecting over explaining and analysing certain aspects of their daily livesPrecisely because financial markets are ` characterised by a high multilevel degree ofuncertainty Hasselstrolaquo m (page 268) argues face-to-face interaction and personalcontacts are of vital importance in creating trust between financial participants Theimportance of trust and reputation in modern financial markets is further illustrated byDavid Bushnell head of Global Risk Management at Citigroup who testified beforeUS Senate in July 2002 on the relations between Citigroup and Enron ` While we regretour relationship with Enron Bushnell (2002 pages 3 ^ 5) said in his opening statement` we acted in good faith at all times Our employees including the bankers who are heretoday are honest people doing honest business _We pride ourselves on our reputationfor being an institution with integrity Bushnell (page 4) went on to stress that allCitigroups dealings with Enron had been evaluated and approved by the appropriatecommittees which have the task of ensuring that Citigroup protects its ` reputation forhigh-quality financings and retain[s] investor confidence Bushnells emphasis on the

516 M de Goede

honesty integrity and reputation of Citigroup illustrates how trust is not just an aspectof hawala and early-modern finance but sits at the heart of global finance today(4)

Thus some of the principles and practices of Western banking are not all thatdifferent from those of hawala In fact it can be argued that what hawala is vilified for(speed trust paperlessness global reach fluidity) are precisely the attributes thatmodern globalising investment banking aspires to Bill Maurer (1999 page 375) dis-cusses how in the early 1970s the use of paper shares in financial markets became seenas hampering market liquidity and as being ` too slow for contemporary capitalismPaper certificates were critiqued as being the ` Damocles sword hanging over thegrowth of our markets and the creation of a national stock-clearance system in 1976promised to end the era in which ` flocks of messengers scurried through Wall Streetclutching bags of checks and securities (quoted in Maurer 1999 pages 377 379)Paperless trading then is seen as key to the growth of contemporary financial marketsand as Philip Cerny (1997 page 157) points out ` the expansion and globalisation of thefinancial services industry in recent years has been virtually synonymous with the rapiddevelopment of electronic computer and communications technology which transfersmoney around the world with the tap of a key By comparison Citigroups websiteadvertises its Global Securities Services arm as ` a global leader in cross-border trans-action services _With a leadership position in virtually every market served CitibankGlobal Securities Services offers clients a full spectrum of custody trust and safekeepingservices (Citigroup 2002a) Citigroup further advertises itself as ` an Economic Enter-prise with ` a global orientation but with deep local roots in every market where weoperate (2002b) In short then hawala operates with a logic of paperlessness speedtrust and local knowledge that is highly valued in Western enterprise discourses(compare Weber 2002 pages 142 ^ 146)

Furthermore the dividing line between `normal financial institutions and hawala isnot as clear-cut as many newspaper reports suggest Terrorist financing relies upon acombination of financial channels which includes regular accounts with major Westernbanks and money-transfer services Àl Qaeda has been able to move money around theworld through [a] network of banks that have included Frances Credit LyonnaisGermanys Commerzbank Standard Bank of South Africa and Saudi Holland bank inJeddah in which ABNAmro of the Netherlands has a forty percent stake the FinancialTimes has reported (Willman 2001) In addition shortly after September 11 it emergedthat the US-based money-transfer system Western Union Financial Services hadbeen used for the transfer of terrorist funds most notably when Atta made fourmoney transfers to the United Arab Emirates thought to be money left over fromthe preparations of the attacks (Business Week 2001)

More generally criminal financial activity within established international banks ison the increase and can be considered according to Lawrence Malkin and YuvalElizur (2001 page 14) as ` the dark side of financial globalisation Malkin and Elizurdocument a number of recent cases in which the biggest Western banks such asCitigroup have been involved in money laundering and other fraudulent activitiesincluding harbouring the money of corrupt Nigerian dictator Sani Abacha They quoteone former private banker who testified before the US Senate as saying ` the privatebanking culture is essentially `dont ask dont tell oumlexactly the kind of culture thatthe hawala network is being vilified for (Malkin and Elizur 2001 page 15) Malkin andElizur (pages 20 ^ 22) conclude ` The United States has become the largest reposi-tory of ill-gotten gains in the world Indeed the construction of categories of harmful

(4) Other sources documenting the importance of trust for the functioning of late-modern financialmarkets include Boden (2000) de Goede (2003) Dodd (1994 pages ix ^ xxviii) and Thrift (2001)


financial activity in current money-laundering initiatives is highly politicised accordingto Vincent Sica (2000) Western banks willingness to receive flight capital from elitesand corrupt regimes in Africa or Latin America Sica argues suggests that ` moneylaundering is a term of opprobrium to describe the movement of money to or fromundesirable persons organisations or countries (Michael Levi quoted in Sica 2000pages 55 ^ 56 see also Naylor 2002)

The focus on hawala in the news and political discourse and the negative stereotyp-ing of hawala networks then have had a dual effect in the wake of the September 11attacks First the alignment between hawala and financial crime has provided anunderstanding of terrorist money as an àlien problem Although hawala offices arerecognised to exist within the United States they are seen as originating from andproperly located within the black markets of Pakistan and the bazaars of Delhi assome of the quotes above demonstrate In the context of Bushs `war on terrorism it iscrucial that the enemy can be identified and isolated instead of being present withinUS institutions and practices in complex ways As Patrick Jost (2001) a former officialof the Financial Crimes Enforcement Network of the US Treasury testified before theUS Senate

` `hawala behaviour lies well outside the cultural experience of most US investiga-tors Hawala is a system where large amounts of money are handed over withoutreceipts confirmation numbers or identification Hawala transactions take placein the context of a large network unlike a `traditional corporate structure Thebusiness of hawala is conducted informally with little in the way of overhead andalmost nothing in the way of regulatory infrastructure making it in this respectnearly the antithesis of banking

The understanding of hawala as the antithesis of `normal banking has created afinancial enemy which is recognisable as òther even if it is not always easily foundor attacked This discourse has facilitated drawing ` the lines of superiorityinferioritybetween us and them in the war on terrorist finance (Campbell 2002 page 6)

Second the identification of hawala as a major and perhaps the main source ofterrorist financing has served to deflect attention away from money-laundering prac-tices within the big international financial institutions and has in the long term beenable to diminish the perceived urgency of the regulation of Western banking The pointhere is not so much that policymakers have deliberately targeted hawala in order todistract from malfeasance in Western banks but more subtly that the portrayal ofhawala as an illegitimate and underground space implicitly produces Western bankingas the legitimate and normal space In the war on terrorist finance hawala has becomewhat Susan Bibler Coutin Bill Maurer and Barbara Yngvesson (2002 page 810)call the ` sovereign exception or the outside of global finance which simultaneouslyproduces its inside or ``the very space in which the juridico-political order can havevalidity In other words the underground dark and illegitimate sphere of hawalaand the legitimate lawful and normal sphere of Western banking are mutuallyconstituted(5)

(5) A similar argument has been made with regard to how offshore finance is imagined in debateson money laundering Offshore is not as Ronen Palan (1998 1999) has argued a lawless areaexternal to or far removed from the legal order of the sovereign state Rather than existing as twodistinct geographical spaces with clear boundaries offshore and onshore are mutually constitutedjuridical constructs brought about by accounting procedures and ` boundaries that exist arerelative and fluid defining a position of differentiation within the regulatory realm of the state(1999 page 21) The `fictitious space of offshore simultaneously creates onshore as the normallegitimate and lawful space of global finance (Roberts 1994)

518 M de Goede

I make this argument despite the fact that the Bush administrations response to theSeptember 11 attacks included promises of quick and harsh actions against criminalactivity within the global financial system The Bush administrations financialresponse to the September 11 attacks was regarded as a ` sea change compared withits earlier positions on financial regulation Prior to September 11 the Bush admin-istration was reluctant to support new money-laundering laws and did ``not wantto pressure international banks in the United States and elsewhere to open theirbooks (Weiner and Johnston 2001) However financial regulation has become a keycomponent in the war on terrorism and Thomas Biersteker (2002 page 83) notesa ``significant change of will on the issue of international financial regulation andanti-money-laundering legislation

On September 23 2001 President Bush issued an Executive Order on TerroristFinancing which was intended to ` starve terrorists of their support funds and whichexpanded the Treasury Departments power to ` target the support structure of terroristorganizations freeze the US assets and block the US transactions of terrorists and thosethat support them (White House 2001a) The order was accompanied by a list ofnames of individuals and organisations who were to be targeted internationally underthe executive order In addition the USA Patriot Actoumlpassed by Congress on October24 2001oumlincluded the International Counter-Money Laundering and FinancialTerrorism Act This act amongst other measures requires US financial institutionsto terminate accounts with foreign shell banks in offshore financial centres andrequires all financial institutions to develop anti-money-laundering programmes(Dam 2002 page 1) In April 2002 the US Treasury used the Patriot Act to extendreporting requirements to mutual funds securities brokers and commodities traders(Schepp 2002) The Financial Action Task Force (FATF)oumlthe OECD organisationfounded in 1989 to combat money launderingoumlwas given an expanded mission inOctober 2001 and became the main international organisation to combat terroristfinancing The FATF released eight special recommendations on terrorist financingwhich included increased reporting requirements for financial institutions but also thelicensing of informal money-transfer networks and increased regulation of nonprofitorganisations(6) The financial response to September 11 it can be argued provided a` window of opportunity for those in favour of international financial regulation andanti-money-laundering efforts (Biersteker 2002 page 83)

However one year on from the attacks the war on terrorist finance seemed to haveprogressed very little The list of twenty-seven individuals and organisations releasedwith Bushs executive order on terrorist financing in September 2001 has causedcontroversy The reliability of the list has been questioned because many of the Arabicnames were misspelled and some of the persons on the list turned out to be dead ` Thespelling of names is a nightmare one banker is quoted in the Financial Times ` theresno correct equivalent of Arabic names Many of those listed [in the Executive Order]are very common names or noms de guerre (Peel and Willman 2001) In addition theFATFs eight special recommendations on terrorist financing are not yet implementedby most countries including the USA and other G7 countries (The Economist 2002)Indeed in September 2002 a report by the special UN monitoring group on al Qaedaconcluded ` No one should doubt that al Qaeda continues to have sufficient resourcesat its disposal to carry out its operations in many areas of the world and to plan and

(6) The FATFs special recommendations on terrorist finance can be found at httpwwwfatf-gafiorgSRecsTF enhtm


launch further terrorist attacks We cannot overstate the risks posed by al Qaeda norshould we understate the complexity of the task remaining in cutting off its funding (7)

If a window of opportunity existed in the wake of September 11 for new interna-tional financial regulation in general and the closing down of tax havens in particularthe focus on hawala in media and political discourse has deflected such opportunitiesAlthough legislative action in the wake of September 11 included tough new measureson all financial institutions one of the few concrete actions taken by the US admin-istration in its efforts to combat terrorist finance has been the closing down of theSomali-based hawaladar al-Barakaat As I will discuss in the next section the closing ofal-Barakaat forced to the surface a number of issues concerning the politics of financialexclusion that provide an alternative understanding of hawala which has been obscuredby the reputation of hawala as a banking system `built for terrorism

Hawala financial exclusion and remittancesOn November 7 2001 the Bush administration blocked the assets of sixty-two organ-isations and individuals including those of the Somali-based bank al-Barakaat(8) Atthe time President Bush stated ``Todays action disrupts al Qaedas communicationsblocks an important source of funds obtains valuable information and sends a clearmessage to global financial institutions You are with us or with the terrorists And ifyou are with the terrorists you will face the consequences According to the WhiteHouse al Barakaat was a financial network ` tied to al Qaeda and Usama bin Ladenwhich ``raise[s] money for terror invest[s] it for profit launder[s] the proceeds of crimeand distribute[s] terrorist moneys around the world to purchase the tools of globalterrorism Al-Barakaat was further accused of ` provid[ing] terrorist supporters withinternet service and secure telephone communications and arrang[ing] for the ship-ment of weapons (White House 2001b) Kenneth Dam of the US Treasury told aSenate hearing in January 2002 that Àl-Barakaat is a Somali-based hawaladar opera-tion with locations in the United States and in 40 countries that was used to financeand support terrorists around the world Dam (2002) further boasted that

` as part of that action OFAC [Office of Foreign Assets Control] was able to freeze[US]$1900000 domestically in Al-Barakaat-related funds on November 7 2001Treasury also worked closely with key officials in the Middle East to facilitateblocking of Al-Barakaats assets at its financial centre of operations Disruptionsto Al-Barakaats worldwide cash flows could be as high as [US]$300 to $400million per year according to our analysts Of that our experts and experts inother agencies estimate that [US]$15 to $20 million per year would have gone toterrorist organizations

The action on November 7 was accompanied by raids on Somali businesses inthe USA including a market in Southeast Seattle that housed Barakat Wire Transferand money-transfer offices in Minneapolis and the arrest of Mohamed Hussein

(7) Quoted at httpwwwunorgav (page accessed in December 2002) The full text of the UNSecurity Council Report (S20021050) can be found at httpwwwunorgDocssccommittees12671050E02pdf(8) Al-Barakaat illustrates the problematic dividing line between hawala and `normal bankingKenneth Dam of the US Treasury called the bank a hawaladar Indeed al-Barakaat seems tohave flourished since the collapse of commercial banking in Somalia following the overthrow ofthe Siad Barre government in 1991 which led to large migratory movements of the Somalipopulation Al-Barakaat transfers money for the Somali diaspora according to the principles ofhawala as explained in footnote 3 However al-Barakaat was a large company and its activitiesincluded the provision of Internet and Islamic banking services in Somalia It is thus not easy tosay whether al-Barakaat was either a hawaladar or a bank because it incorporated elements ofboth and because the dividing line between the two is problematic in the first place

520 M de Goede

a Somali-born Canadian citizen who ran Barakaat North America (Davila 2002Hench 2002)

However soon after the November 7 actions international complaints against theclosing of al-Barakaat were published It transpired that al-Barakaat was the onlybank the largest employer and the only Internet provider in war-torn Somalia The bankoffered international money transfers to the Somali diasporaoumlfor example to Somalifamilies living in the USA sending money to relatives in refugee camps The actions againstal-Barakaat ` made it harder for Somalis and other immigrants to send money to destitutefamily members in Africa one journalist noted (Hench 2002) The day after the closureof al-Barakaat Abdullahi Hussein Kahiyeh general manager of the al-Barakaat groupdenied having links with Osama bin Laden and told the BBC that he would welcome anòpen and transparent investigation into the activities of the group (BBC 2001) TheFrench magazine LExpress reported that the closure of al-Barakaatouml` the economic heartof Somaliaoumlhas reinforced anti-American sentiment with Somalias population who arestill waiting to see the proof against the bank (Gylden 2001) Aid agencies expressedworries that closing the bank ` could push the country already reeling from civil war andfamine into the hands of extremists because ` remittances are the countrys largest sourceof foreign exchange estimated at [US]$500m a year and dwarf foreign aid flows ` In theregion we work Elkhidir Dahoum Save the Childrens Somalia programme manager toldthe Financial Times ` 50 percent of people are completely dependent on these funds(Turner and Alden 2001) The US$19 million that Dam boasted to have seized includedremittances frozen in transit meaning that large amounts of capital never reached theirdestination Al-Barakaats closure ` greatly affected investment and labour opportunitiesin southern Somalia and crippled the construction and transportation sectors it wasnoted in an AfricaOnline article in April 2002 ` The humanitarian impact of the closure[of al-Barakaat] has been great this article concluded (Onyango 2002)

More generally international remittances from migrants working in the West totheir countries of origin represent important and underresearched internationalfinancial flows through which the forms and functions of hawala are more properlyunderstood(9) Although information and statistics on international remittances areincomplete for obvious reasons it is estimated that in many developing countries totalremittances exceed the amounts and importance of international development aid Arecent World Bank report notes that ` remittance flows are the second largest sourcebehind [foreign direct investment] of external funding for developing countries andthat ` remittances are more stable than private capital flows (World Bank 2003page 157) To give some examples it is estimated that Latin America received US$18billion from US residents in 2001 through wire-transfer companies which are nowunder investigation as part of the war on terrorist finance In several countriesincluding El Salvador and Nicaragua remittances represent more than 10 of grossdomestic product and in Mexico the value of remittances exceeds both tourism andagriculture revenues (Hendricks 2002) By comparison an International LabourOrganisation (ILO) study on remittances to Bangladesh found that in some rural areasof that country almost all families receive remittances mainly from Saudi Arabia andSingapore and that remittances constitute an average of 51 of the total income ofthese families (Siddiqui and Abrar 2001 pages iii ^ iv) Another ILO study found that alarge part of remittance income in recipient families is used for ` daily expenses such

(9) The term `remittances is traditionally used to discuss international money transfers by migrantworkers that are recorded in formal accounting procedures (Choucri 1986) It is widely agreedhowever that the recorded flows are a fraction of actual money transfers and here I use the termremittances to refer to both recorded and unrecorded money transfers


as food clothing and health care as well as for improving housing and buying land(Puri and Ritzema 1999)(10)

There has been little study of how exactly remittances reach their destination andwhat their relation is to global finance but it is clear that hawala and other informalmoney-transfer networks are indispensable to remittance flows in particular to Africaand Asia The ILO study on Bangladesh found that 40 of remittances take placethrough hundi (compared with 46 through official banking channels) Accordingto this study the average costs of sending remittances through hundi or hawala issignificantly lower than those of sending the money through Western banks ormoney-transfer companies such as Western Union If we add the total transactioncosts on the sending and receiving ends sending money through hawala could halfthe costs (Siddiqi and Abrar 2001 page v) The amounts of remittances by migrantworkers are typically small and the percentage taken by money-transfer servicesaverages 13 (but can be up to 20) of the amount transferred whereas hawaladealers typically charge a commission of less than 5 (The Economist 2001 page 97World Bank 2003 page 165)

However it is important to note that costs are not the only nor perhaps the mostimportant factor in the use of hawala by migrant workers Migrant workers may beexcluded from Western banking and `legitimate money-transfer institutions for a com-plexity of reasons including a lack of required paperwork in order to open a bankaccount (most importantly in the case of illegal immigrants) lack of language skillslack of a formal education and the skills required to understand and fill out bankingdocuments and a distrust or fear of banks and other unfamiliar financial institutions(Al-Suhaimi 2002 page 77) In Western countries in general and in the USA inparticular opening a bank account is a complicated process which requires a numberof official documents In the USA customers have to pay a fee in order to maintain abank account and account holders can be penalised for having bank balances belowminimum requirements In fact financial exclusion of migrants has been exacerbatedin the USA as a result of the Patriot Act which requires additional identification offoreign nationals wishing to open bank accounts John Herrara of the World Councilof Credit Unions expressed concern before a Senate Hearing in February 2002 that therequirements of the Patriot Act result in ``many banks not welcoming immigrantswho would be forced to ``head back to the usurious practices of money transfercompanies check cashers and payday lenders (2002 pages 2 ^ 3)

Finally it is important to note that the services offered by Western banks forinternational money transfers are wholly inadequate they are costly time-consumingand not designed for small individual transactions As the World Bank (2003 page 165)notes banks have not shown much interest in workers remittances in the past RahimBariek a US hawala broker originally from Afghanistan told the US Senate during aHearing on Hawala of the difficulty of sending money to Pakistan through `legitimatechannels

` In 1997 I wanted to send money to my father-in-law in Pakistan I went to my localbranch of Chevy Chase Bank to wire the money The bank told me that there wasno way that they could guarantee a money transfer to Pakistan because there is agreat deal of corruption in the formal banking system in Pakistan and money oftendisappears I tried to send a money order but it was stolen from the mail The only

(10) The development literature has centred around the question of whether remittances (and labourmigration in general) have a positive long-term impact on remittance-receiving families and (local)economies and whether they contribute to development (for this discussion see for exampleAdams 1998 Ahmed 2000 Arnold 1992 Griffith 1985 Jones 1998 Martin and Straubhaar2002 Puri and Ritzema 1999)

522 M de Goede

way that I could get the money to my father-in-law in Pakistan was through ahawala It was safe faster and cost less (Bariek 2001)

The rural areas in for example Afghanistan and Pakistan from which migrant workersoriginate are often not connected to Western banking networks In the Muslim worlda professor at Georgetown University testified before the same Senate hearings ` cashremains the preferred medium for settling transactions _ Banking institutions areconcentrated in urban centres and cater mainly to the needs of governments and elitesegments of society (Yousef 2001) In addition an International Monetary Fund(IMF) assessment of hawala points to the gender dynamics at work in some migrantworkers use of hawala as hawaladars ` known in the village and aware of the socialcodes would make it possible for women receiving remittances to avoid dealingdirectly with banks (El-Qorchi 2002 page 33) These are reasons why the often usedterm àlternative banking systems is inappropriate according to Nikos Passas anexpert in white-collar crime at Temple University who undertook a study of remittancenetworks for the Dutch Ministry of Justice ` The reasons why I am reluctant to use _the word àlternative Passas writes (1999 page 11) ` are that some of these systemspredate the conventional banking systems and because in many parts of the worldthese àlternatives are actually the ruleoumlthe formal banking system is the exceptionthe àlternative system In fact the United Nations the European Union and inter-national aid agencies have at times used hawala networks including al-Barakaat inorder to transfer money to (rural) areas where Western banks are absent (Karimi2002 Turner and Alden 2001)

Under these circumstances hawala and other informal money-transfer networksoffer services that are fast cheap and reliable compared with other possibilitiesAlthough hawala and other money-transfer networks may sometimes be used forcriminal purposes including the laundering of drug profits Passas (1999 page 67)found that their criminal use has been exaggerated in press and policy documentsand that they do not ``represent a money laundering or crime threat in ways differentfrom conventional banking or other legitimate institutions Passas (1999 page 4)warns that criminal law appears to be the ` least effective way of dealing with informalmoney-transfer networks that measures against these networks ` may give the impres-sion that the cultural traditions underpinning [them] are unfairly attacked andthat extending money-laundering legislation to remittance networks would needlesslycriminalise their clients

It certainly seems to be the case that the actions against al-Barakaat needlesslycriminalised Somali immigrants in the USA while proof of al-Barakaats links withal Qaeda remains tenuous In April 2002 an unidentified senior US official was quotedin the New York Times as saying of the closure of al-Barakaat ``This is not normallythe way we would have done things _ We needed to make a splash We needed todesignate now and sort it out later (Golden 2002 page A10) The same New YorkTimes article goes on to report that the evidence against al-Barakaat hinged on itsconnection to the Somali Islamist movement al Itihaad which ` emerged from thewidespread Somali opposition to Muhammad Siad Barre the American-backed dicta-tor who fell in 1991 (page A10) Al-Barakaats precise connections to al-Itihaadremain however unspecified and al-Barakaats founder denies supporting the Somalimovement In fact Tim Golden (2002) goes on to report the most concrete evidenceavailable against al-Barakaat at the time of its closure on November 7 was provided bythe US Customs Service which had uncovered ` several instances in which Somaliimmigrants who were involved in welfare fraud or drug-dealing had used the companyto send money home In February 2002 GroenLinks the Dutch Green Partyoumlcoalition partner at the timeoumlput questions to the Dutch Parliament on the basis of


a visit to Somalia The Green Party argued that the Somali population had become thevictim of the sanctions against al-Barakaat demanded to know whether the Dutchgovernment had seen evidence against al-Barakaat and argued that the Somali peoplehave the right to see this evidence given the importance of the bank for the Somalieconomy and society (Karimi 2002)

Moreover the evidence against the Somalis targeted in the November 7 operationin the USA and elsewhere has been questioned In July 2002 Mohamed Husseinarrested in the November 7 raids was found guilty of running an unlicensed hawalaand was sentenced to one and a half years in prison and two years of supervised release(US Treasury 2002 page 38) Hussein was convicted because his money-transfer busi-ness did not have a licence in Massachusetts where it operated and no mention ofterrorism or terrorist financing was made in his indictment Husseins conviction is sofar one of the few under the Patriot Act which specifically provides that no proof wasrequired that Hussein even knew of the licensing requirement (US Treasury 2002page 9) Meanwhile a Canadian judge has refused to extradite Husseins brother Libanand the Canadian Foreign Ministry stated that ``Canada has concluded that there are noreasonable grounds to believe MrHussein is connected to any terrorist activity(quoted in Cassel 2002) Further the US government has been forced to drop thecharges against Garad Jama a US citizen of Somali descent who was accused of havingterrorist connections because he ran the Aaran money-transfer business in Minneapolis(Tapper 2002) Jamas business was raided as part of the November 7 operation hisassets were seized and his name was associated with terrorism on the news However inAugust 2002 the US government admitted it had no evidence against Jama andrequested the removal of Jamas name and that of six other individuals and businessesfrom the UN sanctions list of alleged terrorists (Nelson 2002) But at the time ofwriting this paper Jamas name could still be found on the website of the US Treasuryand OFAC in connection with terrorism and money laundering(11)

Finally Sweden has dropped proceedings against three Somali-born Swedish citi-zens whose assets were frozen and whose names were placed on the UN terrorism listbecause they run al-Barakaat Sweden The Swedish government was initially reluctantto listen to the Somalis claims of innocence but the case generated widespreadpublicity in Sweden and as the New York Times reported ` prominent Swedes defiedsanctions regulations by taking up a collection for their legal fees (Schmemann 2002)It has further been reported that the US Treasury sent the Swedish government a list oftwenty-seven pages to prove the case against the men However of these ` twenty-threepages were news-release material a packet of background documents on al Barakaatincluding a statement by President Bush on al Qaeda (Cooper 2002) The Swedishgovernments requests for further proof from the US Treasury remained unansweredand the Swedish authorities declined to press criminal charges against the men InAugust 2002 the mens names were finally removed from the UN sanctions list(12)

In the war on terrorist finance the migrant workers who have suffered from theclosing down of al-Barakaat and the scrutiny of other money-transfer networks areconsidered ` collateral damage by the US Treasury (Scott-Joynt 2002) The US govern-ment has acknowledged the important functions of the hawala networks and hearingsheld before the US Senate in November 2001 saw testimonies which emphasised the

(11) See the US Treasurys site at httpwwwustreasgovofficesenforcementofacactions20020827htmland OFACs site at httpwwwsiacommoneyLaunderinghtmlofac fincenhtml (page accessed onDecember 2002)(12) The UN press release (dated August 26 2002) removing the Swedish suspects and Garad Jamafrom the UN sanctions list can be found at httpwwwunorgNewsPressdocs2002sc7490dochtm

524 M de Goede

Figure 1 Poster from the US Treasury Terrorist Financing Rewards Program(httpwwwustreasgovrewards)


Figure 2 Poster from the US TreasuryTerrorist Financing Rewards Program (httpwwwustreasgovrewards)

526 M de Goede

social and economic functions of hawala for migrant communities(13) However thecrackdown on informal money-transfer networks as a result of September 11 has madeit more difficult and more costly for migrant workers to remit money and has leftmigrant workers looking for formal banking channels to remit funds (World Bank 2003pages 165 ^ 172) Hawala networks have been generally criminalised as illustrated by therecent Terrorist Financing Rewards Program launched by the US Treasury whichmobilises the public to help stop terrorist financing Under the banner ` StoppingTerrorism Starts with Stopping the Money the treasury information poster lists` alternative remittance systems under the heading ` Illicit Sources along with drugsmuggling identity theft fraud and counterfeiting (figure 1) Another poster in thesame campaign shows a picture of Bin Laden pictures of the destroyed World TradeCentre and a picture of cash of different denominations (but no US dollars) under thebanner ` Stop the Flow of Blood Money (figure 2)

Finally more than one year on from the start of the war on terrorist financeal-Barakaat has been virtually destroyed Although some of the organisations NorthAmerican assets have been released in August 2002 90 of the banks assets are in theUnited Arab Emirates and are still frozen and in November 2002 the TransitionalNational Government of Somalia called for the removal of the freeze during peace talksin Kenya (BBC 2002) Rob Nichols Deputy Assistant Secretary at the US Treasuryacknowledges that the closing of informal money-transfer networks such as al-Barakaatis ` causing much grief Nichols calls these effects of the war on terrorist finance regret-table but necessary and told the BBC ` It may require folks to find alternatives but wesimply cannot allow a pipeline to al Qaeda to exist (quoted in Scott-Joynt 2002)

ConclusionsDavid Campbell has argued that the war on terrorism relies on a structure of under-standing enmity and security which bears striking resemblance to the understanding ofgood and evil in the Cold War era ` [T]his structure means Campbell (2002 page 6)writes ` that abuses and atrocities equal to or greater than the original crime that putus on this new path will be overlooked and tolerated so long as the strategic goalremains in focus _ Struggles unrelated to the global threat will nonetheless be cast ascompradors of international terrorism repressive policies will not be questioned andthose that dare criticise this complicity will be labelled fellow travellers of the terro-rists In the USA and its allied countries Campbell (page 7) argues further most ofthe measures taken in response to the September 11 attacks ` are directed againstforeign others

In this paper I have argued that the representation of hawala as a foreign dark andillegal system at al Qaedas disposal has helped to draw the lines between good and badin the war on terrorist finance Hawala as a discourse of financial deviance has legi-timised repressive policies including the targeting of Somali money-transfer businesses

(13) Acknowledgments of the important functions of hawala with respect to migrants remittancescan also be found for example in a report detailing treasury action with respect to the Patriot Act(US Treasury 2002) This report argues that US action with respect to hawala is consistent with theAbu Dhabi declaration which was drawn up during an international conference on hawala orga-nised by the Central Bank of the United Arab Emirates in May 2002 attended by governmentofficials central bankers and representatives of the IMF and the United Nations The Abu Dhabideclaration recognised the need for a better understanding of hawala and emphasised its positiveaspects while recommending its regulation (httpwwwcbuaegovaeHawalaHawala1Presentationshtmaccessed May 30 2002) Nevertheless the US Treasury report criminalises hawala and details caseswhere unlicensed remittance brokers have been investigated and prosecuted


in the USA and Sweden and the disruption of remittances to one of the poorestcountries in the world It has to be made clear that I do not argue thatal-Barakaat and other informal money-transfer businesses are never used for criminalpurposes including money transfers by (potential) terrorists However it has beenproven that al Qaedas members have made use of bothWestern Union money-transferservices and of ordinary checking accounts in US banks In this context the raids onSomali individuals and businesses illustrate how measures taken in the wake ofSeptember 11 target foreign others while measures against Western financial institu-tions that allow money laundering tax evasion and financial exclusion of migrantcommunities remain weak

Indeed it can be argued that the best way to undermine hawala networks is tolegally require mainstream banks to offer accessible and cheap money-transfer servicesand other financial products to migrant-worker communities For example in responseto evidence of money laundering through hawala networks in Saudi Arabia the SaudiArabian Monetary Agency ` has encouraged Saudi banks to meet the challenge ofcreating fast efficient quality and cost-effective fund transfer systems _ that cater tothe special needs of the expatriate workers (Al-Suhaimi 2002 page 78) In the USAand the United Kingdom however the big international banks such as Citibank andBarclays are decreasingly welcoming low-income clients and are concentrating theirproduct development on clients with substantial resources to save and invest (Leyshonand Thrift 1997 pages 225 ^ 259) In contrast the credit unions and the ILO haverecognised remittances as an important political issue and are encouraging the devel-opment of cheap and efficient international money-transfer networks The WorldCouncil of Credit Unions (WOCCU) is developing a remittance network whichprovides cheap and reliable money-transfer services to its members(14) This networkcalled IRnet operates between US credit unions and forty other countries andallows migrant workers to send for example US$1000 to Mexico for a fee ofUS $10oumlmuch lower than fees charged by most money-transfer businesses Howeverthe development of IRnet and other WOCCU initiatives receive little governmentalsupport and John Herrara (2002 page 4) of WOCCU pleaded with the HouseCommittee on Financial Services for regulatory changes including permission forcredit unions to serve nonmembers

In the war on terrorist finance the US government has tried to provide a particularkind of security which has relied on the identification of hawala as the problem` [B]ecause security is engendered by fear Michael Dillon (1996 pages 120 ^ 121)writes ` it must also teach us what to fear when the secure is being pursued Hencewhile it teaches us what we are threatened by it also seeks in its turn to proscribesanction punish overcomeoumlthat is to say in its turn endangeroumlthat which it saysthreatens us Discourses of hawala teach that what we are threatened by in afinancial sense is a dark and criminal underworld of hawala networks which mustbe expelled from US society However this discourse has led to the underestimation ofthe complexity of the task of paralysing terrorist financial networks Because it relieson a simplistic distinction between ùs and `themoumlbetween normal finance and thedeviance of hawalaoumlthe war on terrorist finance fails to recognise the multiple andcomplex ways in which Western banking lends itself to criminal activity Meanwhileremittance networks are needlessly criminalised and initiatives which tackle thefinancial exclusion of migrant communities fail to receive the necessary policysupport

(14) httpwwwwoccuorgprod servirnet for remittances and the ILO see httpwwwiloorgpublicenglishemploymentfinanceremithtm

528 M de Goede

Acknowledgements This research was financially supported by an ESRC postdoctoral fellowshipThe paper has much benefited from comments by Louise Amoore David Campbell DavidGeorge Gunther Irmer Tim Kelsall Paul Langley Bill Maurer Erna Rijsdijk Tim Sinclair EleniTsingou and an anonymous referee for Environment and Planning D

ReferencesAdams R H 1998 ` Remittances investment and rural asset accumulation in Pakistan Economic

Development and Cultural Change 47(1) 155 ^ 173Ahmed I I 2000 ` Remittances and their economic impact in post-war Somaliland Disasters 24

380 ^ 389Al-Suhaimi J 2002 ` Demystifying hawala business The Banker 152(914) 76 ^ 78Arnold F 1992 ` The contribution of remittances to economic and social development in

InternationalMigration Systems EdsMMKritz L LLim H Zlotnik (Clarendon Press Oxford)pp 205 ^ 220

Bariek R 2001 ` Prepared statement of Mr Rahim Bariek Hearing on Hawala and UndergroundTerrorist Financing Mechanisms US Senate Committee on Banking Housing and UrbanAffairs 14 November httpbankingsenategov01 11hrg111401bariekhtm

Bayh E 2001 `Òpening statement of subcommittee Chairman Evan Bayh (D-IN) Hearing onHawala and Underground Terrorist Financing Mechanisms US Senate Committee onBanking Housing and Urban Affairs 14 November httpbankingsenategov01 11hrg111401bayhhtm

BBC 2001 ` Somali company `not terrorist BBCNews Online 8 November httpnewsbbccouk1hiworldafrica1645073stm

BBC 2002 ` Somali factions want bank assets freed BBC News Online 11 Novemberhttpnewsbbccouk1hiworldafrica2442685stm

Behar R 2002 ` Kidnapped nation welcome to Pakistan Americas frontline ally in the war onterror Fortune 29 April page 84

Biersteker T J 2002 ` Targeting terrorist finances the new challenges of financial marketglobalisation inWorlds in Collision Terror and the Future of Global Order Eds K BoothT Dunne (Palgrave Basingstoke Hants) pp 74 ^ 84

Boden D 2000 ` Worlds in action information instantaneity and global futures trading in TheRisk Society and Beyond Critical Issues for Social Theory Eds B Adam U Beck J van Loon(Sage London) pp 183 ^ 197

Bushnell D 2002 ` Opening statement of David Bushnell Hearing on The Role of the FinancialInstitutions in Enrons Collapse US Senate Committee on Governmental Affairs 23 Julyhttpwwwsenategovgov affairs072302bushnellpdf

BusinessWeek 2001 ` Western Union where the money isoumlin small bills 26 Novemberpages 40 ^ 41

Campbell D 2002 ` Time is broken the return of the past in the response to September 11Theory and Event 5(4) httpwwwtnrcom101501cottle101501html

Cassel D 2002 ` US counter-terrorism leap before you lookWorldViewCommentary number136Center for International Human Rights Northwestern University Chicago 6 Junehttpwwwlawnorthwesternedudeptsclinicihrdisplay detailscfmID=326ampdocument type=commentary

Cerny P 1997 ` The search for a paperless world technology financial globalisation and policyresponse in Technology Culture and Competitiveness Change and theWorld EconomyEds M Talalay C Farrands R Tooze (Routledge London) pp 153 ^ 166

Choucri N 1986 ` The hidden economy a new view of remittances in the ArabWorldWorldDevelopment 14 697 ^ 712

Citigroup 2002a ` How Citigroup is organised Citigroup website httpwwwcitigroupcomcitigroupaboutindexhtm

Citigroup 2002b ` Our values add value Citigroup website httpwwwcitigroupcomcitigroupcorporatevaluesindexhtm

Cooper C 2002 ` UN sanctions ensnare individuals not just countriesArizona Daily Star 6 Mayhttpwwwazstarnetcomattackindepthwsj-unsanctionshtml

Cottle M 2001 ` Hawala v the war on terrorism Eastern Union The New Republic 15 Octoberhttpwwwtnrcom101501cottle101501html accessed May 2002

Coutin S B Maurer BYngvesson B 2002 ` In the mirror the legitimation work of globalizationLaw and Social Inquiry 27 801 ^ 843


Dam KW 2001 ` Hunting down dirty cash the international coalition must step up its effortsto stem the flow of terrorist funds or risk further attack Financial Times 12 December

Dam KW 2002 ` Prepared statement of the Honorable KennethW Dam Hearing on TheFinancial War on Terrorism and the Administrations Implementation of the Anti-MoneyLaundering Provisions of the USA Patriot Act US Senate Committee on Banking Housingand Urban Affairs 29 January httpbankingsenategov02 01hrg012902damhtm

Davila F 2002 ` Raid on Iraqi-owned market here prompts nationwide crackdown Seattle Times21 February httpseattletimesnwsourcecomhtmllocalnews134408460 raid21m0html

de Goede M 2000 ``Mastering lady credit discourses of financial crisis in historical perspectiveInternational Feminist Journal of Politics 2(1) 58 ^ 81

de GoedeM 2003 ` Beyond economism in international political economyReview of InternationalStudies 29(1) 79 ^ 97

DillonM1996Politicsof SecurityTowardsaPolitical PhilosophyofContinental Thought (RoutledgeLondon)

Dodd N1994 The Sociology ofMoney Economics Reason and Contemporary Society (ContinuumNewYork)

El-Qorchi M 2002 ` Hawala Finance amp Development 39(4) 31 ^ 33Frantz D 2001 À nation challenged the financing ancient secret system moves money globally

NewYork Times 3 October page B5Ganguly M 2001 À banking system built for terrorism Time 5 October httpwwwtimecom

timeworldarticle0859917822700htmlGillespie J 2002 Follow the Money Tracing Terrorist Assets Seminar on International Finance

Harvard Law School 15 April httpwwwlawharvardeduprogramsPIFSpdfsjames gillespiepdfGolden T 2002 À nation challenged money 5 months after sanctions against Somali company

scant proof of Qaeda tie NewYork Times 13 April page 10Gordon G Powell J 2001 ` Terror probe turns to Minneapolis Star Tribune 8 November

httpwwwstartribunecomstories843813232htmlGranitsas A 2001 ` Osama Bin Laden the cash flow Far Eastern Economic Review 4 October

httpwwwfeercom20010110 04p28regionhtml accessed 10 October 2001Griffith D C 1985 ` Women remittances and reproductionAmerican Ethnologist 12 676 ^ 690Gylden A 2001 ` La Somalie acopy la derive [Somalia astray] LExpress 6 December

httpwwwlexpressfrExpressInfoMondeDossiersomaliedossieraspHasselstrolaquo m A 2000 ` `Cant buy me love negotiating ideas of trust business and friendship in

financial markets in Uacutekonomie und Gesellschaft Jahrbuch 16 Facts and Figures EconomicRepresentations and Practices Eds HKalthoff R Rottenburg H-J Wagener (MetropolisVerlagMarburg) pp 257 ^ 275

Hench D 2002 ` Man guilty of running unlicensed `hawala Portland Press Herald 1May page1AHendricks T 2002 ` Wiring cash costly for immigrants money transfer firms bite into funds

sent home to families San Francisco Chronicle 24 Marchhttpwwwsfgatecomcgi-binarticlecgifile=chroniclearchive20020324MN55527DTL

Herrara J A 2002 ` Testimony of John A Herrera Hearing Entitled The Patriot Act OversightInvestigating Patterns of Terrorist Financing House Committee on Financial ServicesSubcommittee on Oversight and Investigations 12 February httpfinancialserviceshousegovmediapdf021202jhpdf

Jones R C 1998 ` Remittances and inequality a question of migration stage and geographic scaleEconomic Geography 74(1) 8 ^ 25

Jost P 2001 ` Prepared statement of Mr Patrick Jost Hearing on Hawala and UndergroundTerrorist Financing Mechanisms US Senate Committee on Banking Housing and UrbanAffairs 14 November httpbankingsenategov01 11hrg111401josthtm

Jost P Singh Sandhu H 2000 The Hawala Alternative Remittance System and Its Role in MoneyLaundering Interpol General Secretariat January httpwwwinterpolintPublicFinancialCrimeMoneyLaunderinghawaladefaultasp

Karimi F 2002 Àctie voor Somalielaquo dringend nodig [Action for Somalia urgently necessary]Groen Links 26 February httpwwwgroenlinksnlpartij2dekamernieuws4001066html

Leyshon A Thrift N 1997 MoneySpace Geographies of Monetary Transformation (RoutledgeLondon)

Malkin L Elizur Y 2001 ` The dilemma of dirty money World Policy Journal Spring 13 ^ 23Martin P Straubhaar T 2002 ` Best practices to reduce migration pressures International

Migration 40(3) 5 ^ 23

530 M de Goede

Maurer B 1999 ` Forget Locke From proprietor to risk-bearer in new logics of finance PublicCulture 11 365 ^ 385

Miller M 1999 ` Underground banking Institutional Investor 33(1) 102fMuldrew C 1998 The Economy of Obligation The Culture of Credit and Social Relations in Early

Modern England (Macmillan London)Naylor R T 2002 Wages of Crime Black Markets Illegal Finance and the Underworld Economy

(Cornell University Press Ithaca NY)NelsonT 2002 ` Somali awaits clearing of name Pioneer Press 23 August httpwwwtwincitiescom

mldpioneerpress3919263htmOnyango D 2002 ` UN moves to save al BarakaatAfricaOnlinecom 29 April

httpwwwafricaonlinecomsiteArticles1347323jspPalan R 1998 ` Trying to have your cake and eating it how and why the state system has created

offshore International Studies Quarterly 42 625 ^ 644Palan R1999 ` Offshore and the structural enablement of sovereignty inOffshore Finance Centres

andTaxHavensTheRiseofGlobalCapitalEdsMPHampton J PAbbott (Macmillan London)pp 18 ^ 42

Passas N 1999 Informal ValueTransfer Systems and Criminal Organisations A Study into So-calledUnderground Banking Networks Dutch Ministry of Justice httpwwwminjustnl8080b_organwodcpublicationsivtspdf

Peel MWillman J 2001 ` The dirty money that is hardest to clean up Financial Times20 November

Puri S Ritzema T 1999 ` Migrant worker remittances micro-finance and the informal economyprospects and issuesWP 21 Social Finance Unit International Labour Organizationhttpwwwiloorgpublicenglishemploymentfinancepaperswpap21htm

Roberts S 1994 ` Fictitious capital fictitious spaces the geography of offshore financial flowsin Money Power Space Eds S Corbridge R Martin N Thrift (Blackwell Oxford)pp 91 ^ 115

Schepp D 2002 ` New US laws target terror funding BBC News Online 25 Aprilhttpnewsbbccouk1hibusiness1951482stm

Schmemann S 2002 À nation challenged sanctions and fallout Swedes take up the cause of 3on US terror list NewYork Times 26 January page A9

Scott-Joynt J 2002 ` US terror fund drive stalls BBC News Online 3 Septemberhttpnewsbbccouk1lowbusiness2225967stm

SicaV 2000 ` Cleaning the laundry states and the monitoring of the financial systemMillennium29(1) 47 ^ 72

Siddiqui T Abrar C R 2001 ` Migrant worker remittances and micro-finance in BangladeshRefugee and Migratory Movements Research Unit International Labour Office DhakaFebruary httpwwwiloorgpublicenglishemploymentfinancedownloadbanglapdf

Tapper J 2002À post-911American nightmareSaloncom 4 September httpsaloncomnewsfeature20020904jamaindex nphtml

Thachuk K L 2002 ` Terrorisms financial lifeline can it be severed Post-911 Critical IssuesSeries number 191 May Institute for National Strategic Studies National Defense Universityhttpwwwndueduinssstrforumsf191sf191pdf

The Economist 2001 ``Terrorists and hawala banking cheap and trusted 24 November page 97The Economist 2002 ` Terrorist finance follow the money 30 May httpwwweconomistcom

financePrinterFriendlycfmStory ID=1157691 accessed May 2002Thrift N 1994 ` On the social and cultural determinants of international financial centres the

case of the City of London in Money Power Space Eds S Corbridge R Martin N Thrift(Blackwell Oxford) pp 327 ^ 355

Thrift N 2001 `Èlsewhere in Capital Eds N Cummings M Lewandowska (Tate PublishingLondon) pp 82 ^ 105

Turner M Alden E 2001 ` US decision to close bank `will hit Somalis Financial Times9 November

US Treasury 2002 A Report to the Congress in Accordance with Section 359 of the USA PATRIOTAct of 2001November httpwwwfincengovhawalarptfinal11222002pdf

Weber C 2002 ` Flying planes can be dangerousMillennium 31(1) 129 ^ 147Wechsler W F 2001 ` Terrors money trail NewYork Times 26 September page A19Weiner T Johnston D C 2001 À nation challenged the paper trail roadblocks cited in efforts

to trace Bin Ladens money NewYork Times 20 September page A1


White House 2001a ` Fact sheet on terrorist financing executive order press release 24 Septemberhttpwwwwhitehousegovnewsreleases200109print20010924-2html

White House 2001b ` Shutting down the terrorist financial network Terrorist Financial NetworkFact Sheet press release 7 November httpwwwwhitehousegovnewsreleases20011120011107-6html

Willman J 2001 ` Special report inside Al Qaeda trail of terrorist dollars that spans the worldsuitcases of cash informal money transfers standard banking proceduresoumlal Qaeda usedthem all to pay the bills of terrorism Financial Times 29 November

World Bank 2003 ` Global development finance 2003oumlstriving for stability in developmentfinance 2 April httpwwwworldbankorgprospectsgdf2003

Yousef T M 2001 ` Prepared statement of Dr Tarik MYousef Hearing on Hawala andUnderground Terrorist Financing Mechanisms US Senate Committee on Banking Housingand Urban Affairs 14 November httpbankingsenategov01 11hrg111401yousefhtm

szlig 2003 a Pion publication printed in Great Britain

532 M de Goede

Abstract

Introduction September 11 and terrorist finance

Hawala trust and financial history

Hawala financial exclusion and remittances

Conclusions

Acknowledgements

References

advertise in the local press (Passas 1999 page 20)(3) However the defining aspectof informal money transfers is that they escape the formal accounting procedures ofnational governments and international institutions (Choucri 1986 page 697) Incontrast money transfers done by international banks are formally recorded in therespective countries balance of payment figures

In the wake of September 11 hawala became discussed in the international press as` a banking system built for terrorism (Ganguly 2001) One of the first articulations ofthis argument can be found in a September 26 article in the NewYork Times by WilliamWechsler a former US Treasury official and director for Transnational Threats on theUS National Security Council during the Clinton administration ``It is wrong to thinkof al Qaeda as being financed primarily by Mr bin LadenWechsler (2001 page A19)wrote ` More important is al Qaedas global network of financial donors Muslimcharities legal and illegal businesses and underground money transfer businessesThe image of a vast unregulated and underground money-transfer network atal Qaedas disposal became widespread in news reports after the attacks In Timemagazine hawala was described as an ` international underground banking systemthat allows money to show up in the bank accounts or pockets of men like hijackerMohammed Atta without leaving any paper trail (Ganguly 2001) Similarly the FarEastern Economic Review wrote that Asias ` vast underground banking system was` the likely channel bin Laden used to transfer his cash (Granitsas 2001)

Similar discourses of hawala can be found in government statements and policydocuments In the Hearing on Hawala and Underground Terrorist Financing Mecha-nisms before the US Senate in November 2001 Chairman Evan Bayh (2001) said in hisopening statement

` In this war against terrorism one of the most critical battles will take place not ina foreign land but in the financial world as we seek to paralyze terrorist activitiesby cutting off the head of groups like al Qaeda One system which bin Laden andhis terrorist cells use to covertly move funds around the world is through `hawalaan ancient informal and widely unknown system for transferring money _Although most Americans have never heard of hawala that system almost certainlyhelped al Qaeda terrorists move the money that financed their attack on the WorldTrade Center and the Pentagon

When the Bush administration closed down a number of US-based hawaladars onNovember 7 2001 President Bush stated ` The entry points for these networks maybe a small storefront operation _ But follow the network to its centre and youdiscover wealthy banks and sophisticated technology all at the service of mass murder-ers By shutting these networks down we disrupt their murderous work (quoted in(3) Hawala works roughly as follows if for example a migrant worker in the USA wants to sendmoney to family in Pakistan the worker can bring the money (for example US $100) to ahawaladar in the USA The US hawaladar (hawaladar A) will send a message (by telephonefax or e-mail) to his or her contact in Pakistan (hawaladar B) Hawaladar B then hands overthe money (minus a commission) to the migrant workers family (in Pakistan rupees) after thePakistani family member has identified himself or herself (not necessarily through formal identi-fication such as a passport but with the knowledge of for instance a code word) The transactionmay be completed in as little as twenty-four hours The hawaladars profit by charging a commissionfor the transfer

Hawaladar Awill now owe the amount of the transfer to hawaladar B This debt will be settled inthe long term but may remain outstanding for a while Money transfers between the hawaladarsin the opposite direction (for instance by parents sending money to children studying abroad) mayoffset some of the debt Eventually the hawaladars may settle their debt through the underinvoicingor overinvoicing of shipped goods (that is hawaladar A sends goods to hawaladar B but chargesUS $100 less than the actual value of the shipment) The hawaladars may also settle their debtsthrough international bank transfers or by payments in cash or gold (Jost and Singh Sandhu 2000)

514 M de Goede












516 M de Goede













518 M de Goede












520 M de Goede












522 M de Goede











524 M de Goede




526 M de Goede











528 M de Goede



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References












516 M de Goede













518 M de Goede












520 M de Goede












522 M de Goede











524 M de Goede




526 M de Goede











528 M de Goede



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References













518 M de Goede












520 M de Goede












522 M de Goede











524 M de Goede




526 M de Goede











528 M de Goede



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References












520 M de Goede












522 M de Goede











524 M de Goede




526 M de Goede











528 M de Goede



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References












522 M de Goede











524 M de Goede




526 M de Goede











528 M de Goede



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References











524 M de Goede




526 M de Goede











528 M de Goede



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References




526 M de Goede











528 M de Goede



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References











528 M de Goede



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References



















































530 M de Goede



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References



































532 M de Goede

Abstract




Conclusions

Acknowledgements

References

10.1.1.138.333 (1)

Documents

Transcript of 10.1.1.138.333 (1)