BAGHDAD: In Iraq, unregulated money transfers known as “hawala” are at the heart of the country’s largely cash economy, but US officials fear they also help fund the insurgency. The unofficial banking system is common to much of the Middle East where it helps smooth business dealings and sidesteps red tape.
But US officials want it regulated in Iraq to help choke off funds from abroad that might be helping to finance rebel operations, according to a US Treasury official in Baghdad who declined to be named. “Insurgency financing in a cash economy like this is very easy. I want to detect and deter them,” the official said.
“Any place else in the world with modern banking would have tools to combat money laundering and other money used by the insurgency here,” he added. In a grubby “hawala” store in Harthiya, western Baghdad’s unofficial financial district, two men at a high wooden table do business using just four phones, a ledger, and stacks of hard cash.
They handle two to three million dollars a day, according to the manager Haydar, who declined to give his full name. Iraq’s two state-run banks are barred from doing business with the outside world because of “attachment risks” on an estimated 30 billion dollars in commercial debt, the US official said, referring to fears creditors would try to seize money owed.
And commercial banks are so expensive and slow that businessmen often find it more convenient to deal with hawala merchants, said Baghdad Chamber of Commerce chairman Mohammed Hassan al-Kazzaz.
Some 17 commercial banks in Baghdad take up to 10 days and charge up to three percent per transaction to transfer money. Haydar’s office charges a flat 0.05 percent and the money is availalbe almost instantly.—AFP
