Stemming the Money Flowing to Terrorists Money exchange businesses, including those known as hawalas, came under scrutiny and increased regulation after the 9-11 attacks. Since then federal authorities have tried to eliminate potential ways for terrorists to fund their activities.
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Stemming the Money Flowing to Terrorists

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Stemming the Money Flowing to Terrorists

Stemming the Money Flowing to Terrorists

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

Every year, immigrants send hundreds of billions of dollars to their families back home through money remitters. After the 9/11 attacks, investigators discovered that terrorists were also using money remitters to fund their activities without being traced. So the US Treasury Department has imposed a series of regulations on the business. NPR's Ari Shapiro reports on the effect these laws have had.

ARI SHAPIRO reporting:

Two months after the September 11th terrorist attacks, the owner of Bariek Money Transfers testified before the Senate Banking Committee. According to the hearing transcript, here's what Rahim Bariek said. `Without the money families send from the US and other countries, many of the families in Pakistan would not be able to pay rent or afford food and other basic needs.' Bariek went on, `I know all of my customers, and I would never send money for a family that I do not know.' Rahim Bariek was unavailable to speak on tape for this story. He is not accused of funding terrorism. But in May of this year, he pleaded guilty to operating an unregistered money remittal business. He's now awaiting sentencing.

Mr. PAUL McNULTY (US Attorney, Eastern District of Virginia): The reason why money remittal businesses are attractive to drug traffickers or terrorists is because there is such a small paper trail associated with the business.

SHAPIRO: Paul McNulty is the US attorney for the Eastern District of Virginia, where Bariek was indicted.

Mr. McNULTY: The ability to avoid violating the law is not that difficult. Registering is a pretty straightforward process. And once registered, then the business can continue to operate.

SHAPIRO: Bariek was accused of violating a law the requires money remitters to keep strict records of who sends money where. Stuart Levey is the Treasury Department's undersecretary for terrorism and financial crimes.

Mr. STUART LEVEY (Undersecretary for Terrorism and Financial Crimes, Treasury Department): Folks need to come and provide us with their information about where they are and who they are. But perhaps even more importantly, they're subject to the various basic anti-money laundering rules that exist for banks and other financial institutions.

SHAPIRO: Since these rules were strengthened after 9/11, more than 20,000 money remittal companies have registered with the federal government. Douglas Farah studied money remittal services extensively for his book "Blood From Stones: The Secret Financial Network of Terror." He thinks government regulation is the wrong answer.

Mr. DOUGLAS FARAH (Author, "Blood From Stones: The Secret Financial Network of Terror"): If you overregulate or come down very hard on the informal system, it will simply drive them deeper underground, make it more and more difficult to get at, and the transaction would continue.

SHAPIRO: Farah thinks a better approach would be to use human intelligence.

Mr. FARAH: There is a great body of knowledge within the community of how things operate and who does what to whom, and it's a close-knit group whose families have often been in it for many years and different things like that where you could gather a lot more information in a much more informal system than trying to get people to sit down and fill out questionnaires and forms.

SHAPIRO: Even when money remitters do register with the federal government, their customers may go elsewhere rather than share personal information with authorities. Kazi Assaduzzaman is CEO of Shonali Exchange, which is based in New York. The company has eight branches across the country and sends money to Bangladesh exclusively. Assaduzzaman says his company strictly adheres to federal regulations, so they sometimes lose customers.

Mr. KAZI ASSADUZZAMAN (CEO, Shonali Exchange): When we started asking for information, identity documents, a lot of people told us that, `OK, we are going somewhere else.' But we had nothing to do. We had to just stay on our policy.

SHAPIRO: Assaduzzaman says since the government started linking money remitters to terrorism, it's also become much more difficult for people in the business to get backing from American banks.

Mr. ASSADUZZAMAN: Banks are not willing to keep these accounts, for they're worried about if anything happened, they might be penalized. They may lose their reputation, etc., etc.

SHAPIRO: The federal government has been reassuring banks that most money remitters do business that is completely legitimate. But when the next terrorist attack happens, nobody wants to be pegged as part of the money trail. Ari Shapiro, NPR News, Washington.

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