Financing terrorism through hawala banking in Switzerland

Author:Fabian Maximilian Johannes Teichmann
Position:Teichmann International AG, St. Gallen, Switzerland
Pages:287-293
SUMMARY

Purpose This paper aims to illustrate the feasibility of circumventing the Swiss financial sector’s compliance mechanisms by financing terrorism through hawala networks. Design/methodology/approach Based upon a qualitative content analysis of 15 informal interviews with providers of illegal financial services and 15 formal interviews with compliance experts and law... (see full summary)

 
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Financing terrorism through
hawala banking in Switzerland
Fabian Maximilian Johannes Teichmann
Teichmann International AG, St. Gallen, Switzerland
Abstract
Purpose This paper aims to illustrate the feasibility of circumventing the Swiss nancial sectors
compliancemechanisms by nancing terrorism through hawala networks.
Design/methodology/approach Based upon a qualitative contentanalysis of 15 informal interviews
with providers of illegal nancial services and 15 formal interviews with compliance experts and law
enforcement ofcers, the general suitability of hawala networks for the nancing 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 nancing of terrorism.
Research limitations/implications The ndings 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 ofcers and the possibility of secretly
conducting remoteonline searches of electronic devices. Whilethis article focuses on Switzerland, its ndings
could be appliedon a global level.
Originality/value While the existingliterature focuses on understanding the channels terroristscan use
to nance their activities and on developing prevention mechanisms, this paper describes exactly how
terrorismcan be nanced through hawala networks in Switzerland.
Keywords Compliance, Hawala, Financing of terrorism
Paper type Research paper
Introduction
When it comes to combatting terrorismnancing, it is common to think about the role of the
nancial 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 nancingof terrorism.
One of these frequently overlooked actors is hawala networks. Unlike regulated banks,
these networks provide nancial services outside the normal regulatory and compliance
frameworks. They operate secretly and, hence, are not supervised by the competent
authorities.
While some hawala service providers presumably comply voluntarily with the rules
against both moneylaundering and terrorism nancing, 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-rst 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
Hawala
banking in
Switzerland
287
Journalof Financial Crime
Vol.25 No. 2, 2018
pp. 287-293
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-06-2017-0056
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm

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