Recognizing the risks of Somali remittances

Somali HawalaBy  A.D. Kendall:

Last week, Bell State Bank in North Dakota announced that it would stop doing business with companies that remit money to Somalia.  The move follows decisions by Minnesota banks in 2011 to stop providing Somali remittance services, and an attempt by Barclays last year to cut off its partnership with Dahabshiil, a money transfer company with primary operations in Somalia.  The banks have been challenged in courts on both sides of the Atlantic, and advocacy groups have heavily criticized the banks’ decisions on humanitarian grounds.

Indeed, humanitarian considerations are of the utmost importance.  Unfortunately, money transferred to Somalia, particularly through Dahabshiil, all too often falls into the wrong hands and perpetuates the cycle of violence in Somalia.  Banks should stand fast in their original decisions, and here are five reasons why:

1.  The risks are real.  The frequency of cases involving Somalis in the West transferring funds to al-Shabaab over the last few years presents genuine concerns to financial institutions.  For instance, four men in California were found guilty last year of transferring money to al-Shabaab through Shidaal Express, a Somali hawala business.  Two Somali women in Minnesota were sentenced in 2013 for sending money to al-Shabaab through several remittance channels including local hawala dealers and Dahabshiil.  A Saudi-American was also indicted last year for wiring money to al-Shabaab.  In 2012, a man in London admitting transferring £8,900 to fighters in Somalia.  Danish intelligence revealed in 2012 that the equivalent of thousands of dollars a day is sent to terrorist organizations outside of Denmark—mostly to Somalia, and often unwittingly.

Apart from the risks on the ground in Somalia, Western banks have real reasons for concern that if they continue relationships with Dahabshiil, they could subsequently be fined by regulators at a future date if political winds change.  U.S. banks are surely aware, for example, that decisions on whether to fine, settle with, or prosecute banks with lax compliance programs have a great deal to do with the shifting political and prosecutorial priorities of whoever happens to be in charge at the Department of Justice and the financial regulatory agencies.  One official may take a very friendly view toward facilitating Somali remittances this year, but a different person will be calling the shots two years from now.

2. The risks are not decreasing.  Gone are the days of 2012 when al-Shabaab appeared to be on the ropes in 2012 both financially and militarily.  Al-Shabaab was able to turn around its financial situation after the fall of Kismayo by cutting deals with occupying forces.  Al-Shabaab continues to profit from imposing taxes on commodities such as charcoal and sugar, and their role as ivory trade middlemen between poachers and buyers appears to be growing.  Al-Shabaab is still capable of carrying out devastating strikes such as the Westgate Mall attack and the recent assault against Somalia’s presidential palace that left 11 dead.

Read more at The Terror Finance Blog

A.D. Kendall has been blogging about terrorist financing since 2009 at moneyjihad.wordpress.com Follow him on twitter @MoneyJihad

Money Jihad: How Islamists Finance Their Operations

by: Ryan Mauro

The author of the Money Jihad blogwishes to remain anonymous. The daily blog documents how Islamists finance their operations. The author previously served in military-intelligence and has been blogging about terrorism financing for three years.

The following is RadicalIslam.or’s Security Analyst Ryan Mauro’s interview with the author of the Money Jihad blog about how the Islamist terrorism continues to be lavishly funded 11 years after the attacks of September 11, 2001.

Ryan Mauro: What legal loopholes are the Islamists using to finance their operations worldwide?

Money Jihad: Saudi Arabia’s approach to terror finance is a giant loophole in and of itself.  The Islamic zakat tax, what some call “Islamic charity,” is a massive source of jihadist revenues.  The Saudi Arabian Monetary Agency is supposed to approve charitable zakat transfers overseas, but it’s a fig leaf; the Saudis still fund the spread of radical Wahhabism abroad.  Also, it took Saudi Arabia’s Senior Ulema Council nine years after 9/11 to criminalize the financing of terrorism.  Whenever the Council comments on terror finance, it vigorously defends zakat in the same breath.  The Council won’t even define terrorism to include suicide bomb attacks against Israel.

In the U.S., we need a totally different approach to regulating hawala, the traditional Islamic system money transfer system that has helped fund terrorists.  But on balance I would say that most of the terror finance shortcomings in the West involve inadequate enforcement of existing laws rather than a lack of laws.

Ryan Mauro: What laws aren’t being enforced and why?

Money Jihad:  First, the Patriot Act prohibits providing material support to terrorism such as transferring money to Hamas.  The Holy Land Foundation (HLF) trial revealed that Islamic organizations such as the North American Islamic Trust and the Islamic Society of North America worked closely with HLF.  The Bush administration never intended HLF to be their final prosecution, but they ran out of time to pursue HLF’s associates.  Especially now that HLF’s final appeal was rejected by the Supreme Court, this would be a great time to enforce the material support provisions of the Patriot Act against HLF’s unindicted co-conspirators.

Second, the Foreign Agents Registration Act isn’t being enforced with respect to CAIR which engages in political activities in the U.S. but is funded from abroad.

Third, the nonprofit provisions of the Internal Revenue code are being abused by Islamic organizations that claim to be charities but are actually engaged in business activities.  For example, Islamic Food and Nutrition Council of America (IFANCA) is a certifier of halal foods.  It gets most of its revenues from inspecting food manufacturers that seek a halal certification label, but IFANCA claims tax-exempt status on the false basis of receiving revenues from charitable donations and grants, which is discredited by a simple review of their tax forms.  Canada does a better job than the U.S. of stripping bogus charity fronts of their tax-exempt status.

Fourth, Bank Secrecy Act and Treasury regulations require money services businesses, including hawala dealers, to register their business with the Treasury Department’s Financial Crimes Enforcement Network. One study showed that about 85 percent of hawala businesses simply ignore the requirement.

As to why these laws aren’t being enforced, I think it’s political.

Ryan Mauro: What methods are the Islamists using today to raise money, besides soliciting wealthy donors?

Money Jihad: Well, it’s not just about zakat from wealthy donors.  Folks like Amina Farah Ali in Minnesota, Shabaaz Hussain in London, and Irfan Naseer in Birmingham have fundraised for relatively small donations from individual Muslims to support jihad overseas.  A few thousand dollars from the West goes a long way to fund a holy warrior on the ground in Somalia.

But apart from zakat donations, there are a whole host of other Islamic taxes that receive less attention but are huge revenue stream for jihad.  Western reporters call it extortion, but the mujahideen don’t look at it that way.

Take for example two terrorist organizations with a ground game:  Al-Shabaab and the Taliban.  They have fighters on the ground and control definite territory.  Organizations like that rely to a great extent on levying Islamic taxes on the people under their jurisdiction.  The Taliban still gets money from ushr, the Islamic tax on harvests, which includes poppy yields.  Al Shabaab imposes harbor taxes, checkpoint taxes (a practice from the early days of Islam up through Ottoman times), and a zakat on the lucrative Somali charcoal trade.

Ransoms, which are also permitted against infidels by the Koran, are a major revenue source for organizations like AQIM and Abu Sayyaf.  For Hezbollah, the West focuses on their drug money, but they get a lot of money from khums, the Shia Muslim tax on individual profit.

Counterfeiting, Sharia finance, street crimes, welfare fraud — those are all being used as well in different parts of the world to fund terrorism, individual Islamists or both.

Read more at Radical Islam

Ryan Mauro is RadicalIslam.org’s National Security Analyst and a fellow with the Clarion Fund. He is the founder of WorldThreats.com and is frequently interviewed on Fox News.

Money Jihad – Seven ways to stop funding terror

Money Jihad:

Money Jihad has previously proposed methods to limit zakat and hawala—two major mechanisms for funding terror.  Here’s a more comprehensive set of our recommendations that would reduce terrorist financing overall:

  1. Drill, baby, drill.  The U.S. should expand offshore oil drilling, open federal lands for drilling, ease its permitting process for new refineries, encourage hydraulic fracturing methods that tap previously inaccessible energy sources underground, and approve the Keystone XL pipeline.  Increasing domestic U.S. and Western Hemisphere energy production will reduce reliance on Persian Gulf oil supplies and thereby minimize the profits reaped by hostile, foreign regimes that sponsor terror.
  2. Eliminate foreign aid to Pakistan.  Pakistan uses its ISI spy service to fund the Taliban, the Haqqani network, and Lashkar-e-Taiba.  Continuing to waste money on Pakistan is not only wasteful when we can least afford it, but it is suicidal.
  3. Study the true enemy and threat.  Among the most important concepts for the Western public to understand are:

    If we fail to acknowledge Islam as the animating force behind terror finance, we’ll get confused and aim at the wrong targets.  For example, we’ve spent billions of dollars complying with extensive bureaucratic requirements such as currency reports that have yielded minimal results.

  4. Launch a new offensive against Muslim American charities and entities that fund terrorism.  Pick a few of the highest profile ones and make an example of them by prosecuting their leaders and dressing them in orange jumpsuits.  Prosecute Islamic Relief USA under the laws against providing material support for terrorism.  Prosecute the Council on American-Islamic Relations under the Foreign Agents Registration Act.  Strip the halal food certifier IFANCA and the mosque deed financier North American Islamic Trust of their tax-exempt status.
  5. Tax hawala. Terrorists use the traditional Islamic money transfer system known as hawala to exchange money without being monitored.  Hawala dealers in the U.S. are required to register with FinCEN, a financial regulator, but about 85 percent of hawaladars ignore the requirement.  Imposing a simple one percent tax on hawala remittances would help put hawala under the jurisdiction of tax authorities rather than financial regulators who focus more attention on large banks than on small money services businesses.  A one percent tax would be a mild, positive step in beginning to track the transactions to countries that intend us harm.
  6. Designate ISI and Muslim World League as terrorist entities.  Pakistan funds jihadists through its ISI intelligence agency.  Saudi Arabia funds Hamas, Al Qaeda, and other Wahhabi movements abroad through the Muslim World League (MWL) which is comprised of eight subdivisions including the notorious International Islamic Relief Organization and the World Assembly for Muslim Youth.  The U.S. should declare the ISI and MWL to be foreign terrorist organizations in the same fashion that the Iran Revolutionary Guard Corps has been designated.
  7. Stop paying ransoms to jihadists.  Enforce U.N. Resolution 1904 which prohibits paying ransoms to terrorists or broker a new treaty banning the payment by governments or insurance companies of ransoms to specified terrorist groups.  Al Qaeda affiliates, the Taliban, Abu Sayyaf other jihadist organizations have made millions of dollars in the kidnap-for-ransom business.  Discourage recreational travel by Westerners to locations such as Somalia, Yemen, and the southern Philippines.

Any one of these proposals alone could help reduce terrorist revenues by hundreds of millions of dollars.

Other analysts have proposed improving and standardizing financial regulations, adopting conditions-based aid rather than open-ended foreign aid through the use of millennium challenge accounts, encouraging divestment and terror-free investing, promoting alternative energy sources, enacting harsher sanctions against Iran, a putting a greater focus on the prosecution of white collar financial crimes.

Ultimately, you have to examine the biggest sources of revenue for jihad, then look at what actions would be likeliest to reduce those revenue streams.