Bill seeks to regulate

WASHINGTON, Oct. 5 (UPI) -- As part of money laundering bill approved Thursday by the Senate Banking Committee, an informal banking system know as "hawala" will come under increased scrutiny by U.S. authorities.

Congress is moving quickly to pass omnibus anti-terrorism act, with the Banking Committee's International Money Laundering Abatement and Anti-Terrorism Act being incorporated into the larger "USA Act," a comprehensive anti-terrorism bill slated for a Senate vote next week.

Included in the Money Laundering Act, which increased the authority of the U.S. Treasury to supervise and restrict various banking activities that provide loopholes for terror groups to move funds internationally, is a provision introduced by Sen. Evan Bayh, D-Ind., which would give U.S. authorities the ability to monitor the "hawala," network.

The hawala network is an ancient unregulated banking system thought to be used by terrorists, but which is also a standard part of much small business practice in South Asia and the Middle East.

"It is unacceptable that a terrorist today can open the phone book in a number of American cities, find a hawala ... and walk out with thousands of dollars sent from Afghanistan -- with no one to stop him and no record of the transaction," Bayh said. "Our task is to do everything in our power to sever their access to money, and to stop these terror regimes from threatening our way of life."

Hawala is a system of brokers (often referred to by its Hindi name, "hawala," meaning "in trust") that provides a recordless banking system. Hawalas enable individuals to transfer large sums of cash from one country to recipients in another country without the funds ever crossing borders or being recorded.

It is believed that the fugitive Saudi millionaire and Islamic radical Osama bin Laden, alleged by the U.S. government to be responsible for the Sept. 11 terrorist attacks on the U.S., uses the hawala system to move money around the world for the Al Qaida ("the base") organization which he sponsors.

The Money Laundering Act, along with the larger "USA Act," comes in the wake of the Sept 11 attacks which collectively resulted in the death of an estimated over 6000 persons. For banking committee members and for the Senate at large, the matter of combating terrorism -- on military, political and financial fronts -- has become a top priority in light of the changed U.S. security situation.

The bill on money laundering builds on earlier legislation crafted to increase the supervision of the hawala system.

In 1994, Congress passed a law requiring check-cashing businesses and informal financial enterprises like hawalas to register with the government and report transactions over $3,000. The order from Congress was largely ignored by the Clinton administration, with hawalas effectively continuing to operate in the U.S. without supervision.

The provision authored by Sen. Bayh requires the Treasury to extend registration and suspicious activity reporting requirements to hawalas; requires the Treasury to begin immediate on-site inspections of registered hawala; and requires the Treasury Secretary to report to Congress within a year on the success of new hawala regulations.

"The ability to monitor hawalas operating in this country will be an important tool for the law enforcement community in their fight against terrorist financing," said Bayh.

In addition to stricter regulation of the hawala system, Bayh also introduced an amendment requiring stricter accounting of funds sent abroad by international aid organizations to ensure that the well-intentioned money does not end up in the hands of terrorist organizations.

Bayh, who chairs the Banking Committee's International Trade and Finance subcommittee, plans to hold a hearing in the coming weeks to further explore the question of the hawala system.