Informal Value Transfer Systems, Terrorism and Money Laundering

• NCJ Number: 208301
• Author(s): Nikos Passas
• Date Published: November 2003
• Length: 137 pages
• Grant Number(s): 2002-IJ-CX-0001
• Agencies: NIJ-Sponsored
• Publication Type: Research (Applied/Empirical)

Annotation

This study examined the methods used for informal money transfer, its use by criminal clients, and the modus operandi used for such transfers.

Abstract

Following the September 11th terrorist attacks, the quest to learn more about Informal Value Transfer Systems (IVTS) became urgent, especially since many terrorist cells originate in countries that have prevalent informal payment methods. IVTS refers to “any system or network of people facilitating, on a full-time or part-time basis, the transfer of value domestically or internationally outside the conventional, regulated financial institutional systems.” Previous research has revealed that hawala has been used as an IVTS to fund terrorist activities in South Asia and may have been used to fund the September 11th attacks in the United States. However, upon investigation it became clear that hawala was not the only, or even the main, IVTS through which substantial amounts of money could be transferred. IVTS can be very adaptable, bending to new demands and opportunities by diversifying tools and instruments for settlement. In fact, 16 forms of IVTS have been identified. Despite the fact that IVTS is used to fund terrorist and other criminal activities, many forms of traditional IVTS are rooted within the culture and support legitimate needs as well. Attempts to eliminate or stop IVTS are thus likely to backfire and cause resentment toward the United States and its interests. Attempts to regulate or restrict IVTA without consensus are also likely to fail. To facilitate law enforcement and regulatory actions, the report presents an analysis of the investigatory difficulties likely to be encountered. The report also presents information about the differences between informal funds transfer systems (IFTS) and IVTS’s. Finally, two sets of indicators are presented in regard to the operation of IFTS. Policies that aim to disturb the root of terrorist activities, such as their funding mechanism, hold promise for making substantial strides toward greater protection against terror. Figures, tables, references, appendix