Washington, Feb 4: Radical Pakistani madrasas are enaged in massive trade-based money laundering to fund jihadist groups, eminent experts have told American lawmakers who expressed concerns over terror financing.
Concerned over the practice, Congressman Stephen F Lynch said trade-based money laundering (TBML) involves using trade and products or commodities for value in order to divert and obscure the true nature of the illicit wealth.
“Trade-based money laundering is related to terrorist finance,” John Cassara, former US Intelligence Officer and Treasury Special Agent, told members of the House Financial Services Committee during a Congressional hearing.
He said in one example of TBML and terrorist financing, a Pakistani madrassa was linked to radical jihadist groups and it received large amounts of money from foreign sources.
“It was engaged in a side business dealing in animal hides. In order to justify the large inflow of funds, the madrassa claimed to sell a large number of hides to foreign customers at grossly inflated prices. This ruse allowed the extremists to ‘legitimise’ the inflow of funds which were then passed to terrorists,” Cassara said.
According to World Bank and IMF estimates, unofficial remittances could be well over USD 1 trillion as against the World Bank estimates that global remittances through official channels will reach USD 707 billion by 2016.
Nikos Passas, professor of criminology and criminal justice at Northeastern University’s College of Social Sciences and Humanities, said there are cases of terrorism finance and trade-based money laundering or other money laundering that goes through them.
“In Mumbai, the attacks of Mumbai and the Indian parliament — those cases were solved because of hawala collaboration. In Dubai, the Dubai police and D A made a big money laundering case with trade because of hawala information,” Passas said in response to a question from Lynch, who is also a ranking member of the Committee.
In response to another question from Congressman Andy Barr, Cassara said he believes trade-based money laundering is a major problem.
“But it depends on the part of the world you’re talking about. Certainly, if you’re talking about South Asia, you’re talking about Afghanistan, Pakistan, the Afghan Transit Trade, it’s absolutely huge. Areas in Libya, Somalia, it’s huge. In other areas, perhaps not as important,” he said.
In his remarks, Congressman Michael G Fitzpatrick said trade-based money laundering is the growth industry in terror finance.
Lynch said trade-based money laundering involves using trade and products or commodities for value in order to divert and obscure the true nature of the illicit wealth.
Currently, there is an ample opportunity for terrorist groups to exploit the international trade system, with low risk of being caught, he said.
Congressman Robert Pittenger, said criminal enterprises have relied on this method of illicit financing for years.
However, many believe that this is an emerging technique now being used by terrorist groups to finance their violent and oppressive operations, he said.
“Congress should prioritise efforts to stop the flow of money and resources to terrorist organisations. We must ensure that organisations like the financial crimes enforcement network receive their resources and intelligence necessary to combat trade-based money laundering and other methods of illicit financing,” he said.