A Lebanese businessman sanctioned for ties to Shiite militia group Hezbollah whose trial began in Paris on Tuesday is accused of being part of a criminal money-laundering ring that used an ancient banking practice to fund the group’s arms in Syria.
Hawala, the anonymous banking practice, is a common method of payment for foreign workers who use remittances to send money across the world. But nefarious actors are using the system as a conduit for their money to move outside of institutional global financial networks.
Dating back to the spice trade, hawala – translated from Arabic as “transfer” – and the storefronts that serve the practice, known as hawaladars, act as a value transfer service that predates modern transaction methods. It is predominant in North Africa, the Middle East, the Horn of Africa and south Asia.
The system is based on iron trust in brokers who immediately receive and release money in another destination. Its speed, reliability and relative cover from the traces of security services have made it an attractive proposition for terrorist groups and militias alike.
While it originated as a practice between Arab and Muslim traders on the Silk Road, today its use is not confined to Muslims but rather a range of people of all creeds who have grasped the benefits of the service that acts like an old-day Western Union.
Identification is rarely, if ever, needed, according to financial crime experts, and passcodes are used to complete transactions, rather than vital personal information. No money ever physically moves, only given at the destination of origin and released at the intended destination.
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The alleged use of this system by Hezbollah for its battle in Syria alongside the forces of Syrian President Bashar Al Assad is unsurprising given its past use by a variety of extremists who seek to move money around the world.
In 2010, the Times Square bomber Faisal Shahzad received $7,000 in funds through the hawala system on behalf of the Pakistani Taliban. Indian bomb blasts in 1993 were funded through hawala and the Taliban used the system often before 9/11.
Most recently, European investigators discovered a halawa network in 2015 that was funnelling money to fighters aligned with ISIS and the Al-Qaeda-linked Nusra Front in northern Syria.
Billions of dollars are believed to be traded via the system every year and, even though intelligence services across the world pay close attention to the practice, they cannot trace every transaction.
Financial crime experts warn that until hawala witnesses a regulation overhaul, making it more closely aligned to the modern banking system, groups who seek to fund their roles in conflicts across the region and the world will still be able to pass funds from broker to broker relatively unnoticed.
But, on this occasion, investigators across seven countries, including the US, France, Italy, Germany and Belgium, stopped Hezbollah in its tracks.