Since the attacks of September 11, much has changed in America. One area where our mind-set should never be the same is in our approach to national security. The new world we operate in requires us to take a comprehensive look at our national security strategy through an entirely new set of eyes. In this war against terrorism, one of the most critical battles will take place not in a foreign land, but in the financial world, as we seek to paralyze terrorist activities by cutting off the financial head of groups like al Qaeda. In an interview in October with a Pakistani newspaper, bin Laden seemed unconcerned about our efforts to shut off the flow of his money. He said Al Qaeda has three finance systems organized by backers who are as "aware of the cracks inside the Western financial system as they are aware of lines on their hands." "These are the very flaws of the Western fiscal system, which are becoming a noose for it," bin Laden said.
One system which bin Laden and his terrorists cells use to covertly move funds around the world is through "hawala" an ancient, informal, and widely unknown system of transferring money. Today’s hearing will examine hawala and how it has been exploited by Usama bin Laden. Although most Americans have never heard of hawala, that system almost certainly helped al Qaeda terrorists move the money that financed their attacks on the World Trade Center and the Pentagon.
Hawala, from the Hindi word for "trust," is a system of brokers that provides paperless banking transactions and enables individuals to transfer large sums of cash from one country to another without the funds ever crossing borders or being recorded. The hawala system predates conventional banking by thousands of years and is prevalent in Afghanistan, India, Pakistan, the Middle East and parts of Africa.
Just last week, the president used his emergency powers to shut down a Somalian conglomerate connected to al Qaeda that was operating in several U.S. cities, including Fairfax City and Falls Church, Virginia. The Al Barakaat network used hawala to move funds to Somalia, Afghanistan and the Sudan – funds used by al Qaeda.
On our first panel, Jim Sloan, Director of the Treasury Department’s Financial Crimes Enforcement Network [FinCEN] will testify about the Al Barakaat case. FinCEN has been aware of the law enforcement problems raised by hawala for many years. In 1998, the agency released one of the only reports on the subject. FinCEN is also the agency charged with enforcing the money service business regulations effective on December 31, 2001, which now cover hawala as well. Welcome Mr. Sloan. We look forward to hearing your testimony with regard to hawala, Al Barakaat, and the money service business regulations.
Also testifying will be Mr. Rahim Bariek. Mr. Bariek is a hawala broker, who runs his business in Northern Virginia. Mr. Bariek provides important hawala services for the Afghan community with family in Pakistan. Welcome Mr. Bariek. Thank you for joining us today. This will be the first opportunity for Congress to hear first hand from a hawala dar.
Our final panel will include two experts on hawala. Professor Tarik Yousef from Georgetown University, who is a specialist in Middle Eastern and Asian banking systems. And, Mr. Patrick Jost formerly of FinCEN and co-author of the 1998 report. Welcome gentlemen.
While much of the money that flows through the hawala system in the U.S. is used for legitimate purposes, hawala do also allow terrorists and drug dealers to smuggle money into the U.S., outside the detection of the global banking system. Congress too has recognized the danger of unregulated hawala, and moved to regulate their activities in 1994 with passage of a law requiring check-cashing businesses and informal financial enterprises like hawala to register with the government and report transactions over $3,000.
Unfortunately, the regulations implementing this statute remained unpublished for six years, while hawala continue to operate in the U.S. without supervision. That was the reason that I proposed an amendment that will expedite the enforcement of hawala regulations and give U.S. law enforcement and intelligence authorities some of the tools they need to intercept terrorist financing before it’s too late. My proposal was included in the Anti-terrorism legislation, which the president signed on October 26, 2001.
Targeting the financial network of terror groups like al Qaeda will not, by itself, strike a deathblow to international terrorism. However, it will disrupt the criminal financial network supporting terrorism, and it will give our law enforcement and intelligence communities a better chance of detecting and preventing terrorist activities. We must also aggressively seek out every angle that terrorists use to finance their operations. We must make sure that every cent of U.S. aid is going to the people who need it the most in developing countries – not to terrorist groups for training and arms.
I intend to hold future hearings on others forms of terrorist financing, like the link between al Qaeda and certain charities and non governmental organizations. Reports have surfaced that some terrorists use funds received by charties.
The war against terrorism demands that we strengthen our resolve, sharpen our skills, and redouble our efforts. I look forward to all of the testimony we will hear today, and to taking the next step to cut off terrorist financing.