System transfers funds to radicals

An "underground" banking system - investigated by the US for allegedly transmitting funds for terrorist operations - is suspected of being used in Australia to channel money to extremists in Africa.

Counter-terrorism agents and African community leaders have warned that Hawala - a remittance system used to transfer money overseas, especially tocountries lacking traditional financial structures - is being used to funnel private and community-raised funds to terrorist groups in Somalia and other African nations.

The Australian Transaction Reports and Analysis Centre - the financial intelligence authority that monitors the thousands of Hawala outlets - yesterday also admitted it was unable to determine the final destination of transactions and largely relied on Hawala dealers to report suspicious clients.

Somalian Muslim spiritual leader Hersi Hilole said Hawala was abused by community members to bankroll al-Qa'ida-linked terror networks in Somalia.

"There are people who are collecting money from the community and sending that money through this Hawala system to terrorist organisations or organisations that are linked to terrorists," the Sydney imam said yesterday. He said that while Hawala - meaning transfer in Arabic - was largely used by ethnic communities in Australia to subsidise their families' living expenses overseas, authorities needed to do more to track down anyone misusing it.

Hawala is an ancient financial transfer system widely used in Asia and Africa. The funds given by clients to Hawala dealers are often not physically transferred. Instead, a Hawala operator would contact their counterpart overseas by phone and ask them to pass on the sum of money to the third party. The Hawala dealers square up at a later date. Austrac chief executive Neil Jensen said Hawala was a "high-risk" system open to exploitation by terrorism financiers.

He said Austrac was wary that Hawala dealers may refuse to tip off the body about untoward transfers - despite risking jail sentences and thousands of dollars in fines - to protect clients.

"Hawala is generally related to an underground type of activity outside of the normal financial system," Mr Jensen said.

"Through financing of terrorists' studies, facilitators have been found to use alternative remitters services to move money for money laundering or terrorist financing-related issues. As a consequence, they are considered globally to be a high risk for those activities."

He said Hawala operators were required by law to be registered with Austrac, a process that obligates them to report all electronic transfers, including those done by phone. Unregistered dealers risk being locked up or fined under the Anti-Money Laundering and Counter-Terrorism Financing Act.

But security agents said Hawala operators were not rigorous with keeping records of transactions.

"No one knows where the money ends up," one source said. "It's a good system when there's no other system in place, but it's open to being abused. There's no track record or paper trail, so it makes things hard for security agencies trying to track certain transactions down. It's largely self-regulated."

A Hawala operator in Melbourne, al-Barakat, had its funds frozen in 2001 and was subsequently shut down after its US business arm was investigated by the Bush administration for allegedly helping terror organisations fund their activities.

While al-Barakat was cleared of any wrongdoing, the Melbourne branch was closed.

Source: The Australian