Informal Value Transfer Systems, Terrorism and Money Laundering

To facilitate law enforcement and regulatory actions in the relatively unfamiliar field of IVTS, three items are produced in this report. First, an analysis of difficulties likely to be encountered in investigations of hawala transactions in contrast with anticipated difficulties in investigations of any transnational type of misconduct. The point is to show what is specific about hawala and how it impacts regulatory actions. Second, a distinction is drawn between informal funds transfer systems (IFTS) and informal value transfer methods (IVTM). Both are within the wider category of IVTS, but the latter almost always involves crimes and other misconduct, whereas the former are primarily serving legitimate customers. In this way, controllers would know whenever they detect an IVTM operation, crimes were very likely committed. On the other hand, when they detect an IFTS operation, they should not automatically assume crimes are committed. Third, two sets of indicators are developed regarding the operation of IFTS. One is indicators of IFTS activity. In such cases, if the US operators are not registered and licensed, as required, they would be committing an offense. Otherwise, the operations/transfers probably do not involve other crimes. The second set of indicators flags criminal abuse of IFTS. When one or several of them obtain in a given case, the situation would merit investigation to find out what types of funds are transferred and for what purposes. IVTS interface with a wide range of criminal transnational activities. Therefore: * Understanding IVTS requires a better understanding of transnational crime, an understudied area thus far. * Studying IVTS more in depth can contribute to a better understanding of transnational crime. To a very large extent, traditional forms of IVTS serve legitimate needs that cannot be met in other ways. It would be wise therefore to: * Explore ways of offering additional channels for fund transfers; * Ensure continuation of vital services and minimum disruption; * Improve institutional or official methods offering similar services; * Reduce economic and other criminogenic asymmetries. IVTS include an extremely wide range of methods from very low tech and simplistic to highly sophisticated; we also see the interface of several of them, including cross-ethnic collaborations. Terrorism funding can and has come from all of the above channels. It is essential, thus, to consider, * that paying attention only to hawala-type operations is misplaced and ineffective; * the need for inclusive, comprehensive policy based on an adequate understanding of interfaces; * focusing on the most significant, rather than excluding from policy considerations methods like trade diversion; and, * engaging in more in depth studies of each method with the view of training officials for better detection and separation of legal use from suspicious and criminal abuses. As pressure often mounts to take swift action, we need to calculate as precisely as possible the anticipated consequences of policy and measures of anti-terrorism or other initiatives, so that we can: * ensure international cooperation of law enforcement and other authorities is improved (seminars, training, awareness for domestic and foreign organizations); * ensure law enforcement requests for assistance are based on facts, not on flimsy and uncorroborated evidence; * ensure US law enforcement agencies assist in the work of overseas counterparts as reciprocity is indispensable for long term successes. On a different level, given that strategies related to the financing of terrorism cannot solve all problems, we need to fully understand and fight the roots of terrorism and other serious crime problems. Supply-side approaches only have a limited and rather short-term effect. Demand-side policies hold a stronger promise for a safer planet and protection of US interests. * Given the ease with which serious transnational crime occurs, it would be cost-effective to better understand the causes and facilitating circumstances of these crimes and construct policies aimed at tackling the root of the problem. Criminal policy is only an immediate term solution, but offers little hope of effectively dealing with the problem in the long run.