Troubling analysis of terrorist banks

Insight on the News, Feb 4, 2003 by Jaime Dettmer

According to an International Monetary Fund (IMF) analysis, attempts by the United States and other G7 governments to curb the private and secretive Hawala banking system--exploited by terrorist groups such as al-Qaeda for the transferring of funds and the concealment of cash--are doomed to fail.

The IMF believes that the G7 effort to persuade other foreign governments to license and regulate informal money-transfer systems will not work. "As long as there are reasons for people to prefer such systems, they will continue to exist and even expand," the study concludes.

The scale of Hawala banking is impossible to quantify, but the IMF thinks billions of dollars a year are transferred in the underground banking system centered in the Middle East and on the Indian subcontinent.

The Indian government disputes that Hawala is central to terrorist financing, arguing that groups such as al-Qaeda use traditional banking systems more and favor easily tradable goods, including gold and diamonds, to transfer funds and finance operations.

JAMIE DETTMER IN LONDON AND ROME