Financing terrorism through
hawala banking in Switzerland
Fabian Maximilian Johannes Teichmann
Teichmann International AG, St. Gallen, Switzerland
Purpose –This paper aims to illustrate the feasibility of circumventing the Swiss ﬁnancial sector’s
compliancemechanisms by ﬁnancing terrorism through hawala networks.
Design/methodology/approach –Based upon a qualitative contentanalysis of 15 informal interviews
with providers of illegal ﬁnancial services and 15 formal interviews with compliance experts and law
enforcement ofﬁcers, the general suitability of hawala networks for the ﬁnancing of terrorism was assessed
and concretemethods of doing so were better understood. In addition, it is shown how terroristscan limit their
risks in using the servicesof hawala bankers.
Findings –Hawala bankingin Switzerland is extraordinarily usefulfor the ﬁnancing of terrorism.
Research limitations/implications –The ﬁndings are based on semi-standardized interviews limited
to the perspectivesof the 30 interviewees.
Practical implications –Law enforcement and intelligence agencies must be provided withadditional
tools, suchas a broader scope of allowable activity for undercoverpolice ofﬁcers and the possibility of secretly
conducting remoteonline searches of electronic devices. Whilethis article focuses on Switzerland, its ﬁndings
could be appliedon a global level.
Originality/value –While the existingliterature focuses on understanding the channels terroristscan use
to ﬁnance their activities and on developing prevention mechanisms, this paper describes exactly how
terrorismcan be ﬁnanced through hawala networks in Switzerland.
Keywords Compliance, Hawala, Financing of terrorism
Paper type Research paper
When it comes to combatting terrorismﬁnancing, it is common to think about the role of the
ﬁnancial sector in general and banks in particular. Banks are required to comply with a
large variety of rules and regulations and spend billions of Swiss francs every year on
compliance matters. However, it is frequently forgotten that other actors can also play a
crucial role in the ﬁnancingof terrorism.
One of these frequently overlooked actors is hawala networks. Unlike regulated banks,
these networks provide ﬁnancial services outside the normal regulatory and compliance
frameworks. They operate secretly and, hence, are not supervised by the competent
While some hawala service providers presumably comply voluntarily with the rules
against both moneylaundering and terrorism ﬁnancing, others most likely do not,especially
because of the costs associated with complex compliance procedures. In addition, hawala
bankers are often concerned that their customers might not appreciate efforts to verify both
the origin and the destinationof funds.
One might wonder about the nature and identity of hawala banking customers in the
twenty-ﬁrst century –after all, commercial banks are readily available nearly everywhere,
and those who do not want an account at a commercial bank can choose regulated money
Journalof Financial Crime
Vol.25 No. 2, 2018
© Emerald Publishing Limited
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