Finance and the war on terror

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Finance and the war on terror
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Aims of lecture

• How has the global financial system been
  implicated in the Sept. 11 attacks?
• Are hawala networks the dangerous other of
  Western finance?
• How might new financial regulations be (a)
  mediated by neoliberalism and (b) reproducing
  exclusions and inequalities?

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Financing terror and

• Following Sept. 11th, questions were asked about
  how the attacks were financed
• According to the 9/11 Commission the 9/11
  plotters eventually spent somewhere between
  400,000 and 500,000 to plan and conduct their
  attack
• Patriot Act creates new powers to access private
  financial data

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the war on terrorist finance

• In this war against terrorism, one of the most
  critical
• battles will take place not in a foreign land,
  but in
• the financial world, as we seek to paralyze
  terrorist
• activities by cutting off the heads of groups
  like al Qaeda.
• Chairman Evan Bayh addressing US senate
  hearing on terrorist financing in Nov.
  2001
• But how can this be done without paralyzing
  neoliberal
• Globalization, which involves trillions of
  dollars being
• traded across financial markets everyday?

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Global financialization

• Financial Deregulation
• The rise in speed and volume of transnational
  capital flows
• Financial Disintermediation
• Govt.s increasingly raise money through global
  debt markets rather
• than borrowing from national banks
• 1989
• - Daily turnover in foreign-exchange markets
  rises from 180
• billion in 1986 to around 1, 200 billion in 1998
• - Rise of 24 hour trading and Global cities
• In 1993 US investors bought more foreign
• equities than in whole of the 1980s, much of it
• in emerging markets

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Placing blame

• Hawala was increasingly orientalized, depicted as
  a dark, mysterious, secretive financial network
  connecting charities, mosques, illegal
  businesses and terrorists from the middle east to
  the US
• Hawala is a banking system built for
  terrorisman underground system that allows money
  to show up in the bank accounts or pockets of men
  like hijacker Mohammad Atta, without leaving any
  paper trail (Time, Oct. 2001)
• Kenneth Dam, Deputy secretary of the US Treasury
  claims, terrorists move money through the hawala
  system, an ancient, trust-based way of moving
  money leaving virtually no trace (Financial
  Times, Dec. 2001)

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What is hawala?

• Hawala is an informal system for transferring
  remittances to someone in a Middle East, Asian or
  African country
• Hawaladars are not regulated in the U.S. but must
  be registered and report suspicious activity to
  the government.

From www.interpol.int
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Why do people use hawala?

• Many migrants send international remittances
  through hawaladars
• rather than major banks or money transfer
  companies (e.g.
• Western Union) because
• (1) Its cheaper, hawala dealers typically charge
  a commission of less than 5 - and interest is
  banned under Islamic law
• (2) They are excluded form Western banks and
  money transfer institutions because of language
  problems, lack of paperwork etc., or
  discrimination particularly illegal immigrants
• (3) Many parts of the Global South, particularly
  poor rural regions, are not connected to major
  banking networks
• Its fast, cheap and reliable

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• On Nov 7th 2001, the Bush administration closed
  down a number of US-based Al-Barakat hawaladars
  and conducted raids on many Somali businesses
• This included a grocery store in Seattle, which
  has a Somalian population of approx 10, 000
• Kenneth Dam claimed to have
• disrupted millions of dollars
• destined for terrorist organizations

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Remittances in the global economy

• WB estimates that migrants sent more than 167
  billion to their families in developing countries
  in 2005 a figure more than twice the level of
  international aid. In California alone, 8 million
  illegal migrants work in the cash-in-hand
  economy.
• If the American government needs evidence they
  can go to the Red Cross or United Nations. These
  organizations know weve been sending money to
  Somalia for years, and they can trace where its
  going. And where its going is to our starving
  families in refugee camps, not Osama bin Laden
• Abdul Aziz, 26, Seattle resident, quoted in
  Seattle P-I, Nov. 9th, 2001

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Missing money?

• According to the 9/11 Commission report
• Despite unparalleled access and support from
  the central bank of the United Arab Emirates,
  which made available thousands of pages of
  documents related to Al-Barakaat accounts, they
  found no evidence linking al-Barakaat to
  terrorist activity, and no evidence that the
  closing of al-Brakaat hurt al-Qaeda financially
• (cited in de Goede Moore, 2005158)

So, where did the hijackers get their money?...
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Probably from a major US bank that operates
approximately 1,700 bank SunTrust also has a
long-standing relationship with the Coca-Cola
company
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Offshore banking

• Dont major banks also try to eliminate paper
  trails and operate outside normal regulations?..

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Western banking and dataveillance

• Regulations of western banking has tended to
  reconcile the need for
• the continued operation of deregulated,
  (neo)liberal financial markets
• and even opened profit opportunities to private
  risk-assessment
• companies through the promotion of
• 1. software that can identify suspicious
  transactions
• 2. stricter KYC regulations
• 3. rewards scheme for reporting
• suspicious activity
• The 9/11 commission found that the hijackers use
  of the financial
• system was utterly routine but in this culture
  of suspicion, who
• becomes suspect ?....

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Mark Lombardi, 1951-2000
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Conclusions

• The war on terrorist finance needs an enemy that
  must be identified and isolated instead of being
  present within US institutions and practices in
  complex ways? (de Goede, 2003518)
• The war on terrorist finance has hit some
  migrant communities particularly hard
• The war on terrorist finance is exacerbating
  financial exclusion in its attempts to predict
  terrorist actions

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Matricula Consular