Trying to Cut Off Terrorists' Money Supplies

Efforts by a key Persian Gulf nation to regulate money transfers are criticized as inadequate.

By SHARE

ABU DHABI—When the United Arab Emirates agreed to host an annual meeting of Middle Eastern and North African finance officials to discuss efforts to combat terrorist financing, officials in this oil-rich Persian Gulf nation were clearly hoping to win some recognition for their efforts to boost regulation of its thriving financial industry.

"Our institutions are clean," says Abdulrahim Mohamed al Awadi, the head of the UAE Central Bank's anti-money-laundering unit. "All banking and financial institutions are licensed, registered, supervised, and examined by the Central Bank."

But a confidential assessment, drafted by other Arab nations and the International Monetary Fund and presented at the conference this week, was critical of the UAE's terrorism finance regulations, concluding that they fail to meet international standards across the board.

Indeed, while the UAE's economic capital of Dubai has emerged as one of the world's leading financial centers, it has not been able to shake its reputation for being an easy place to move money. "They [the UAE] are a major financial center in the most important region of the world when it comes to terrorism finance issues," Daniel Glaser, a U.S. deputy assistant secretary of the treasury for terrorist financing and financial crimes, said in an interview. "It behooves them to make sure they have a state-of-the-art system in place."

The risks became apparent after Sept. 11, 2001, when officials realized that the hijackers received money transfers through operatives in Dubai. But a State Department report issued last month warned that that UAE was "particularly susceptible" to money laundering because it is a trading hub that is attracting not just legitimate businesses but also drug traffickers, diamond traders, smugglers, and underground money transfer brokers.

Still, the UAE has adopted a set of new measures, including an effort to register the vast informal banking network, known as hawala, made up of underground brokers who send money abroad. Awadi says that UAE officials have registered more than 240 Hawala agents. "We know who they are," he says. "We are a founder of hawala regulations."

Up to now, however, registration is voluntary. And neither Awadi nor other officials can provide an estimate for how many additional hawala brokers currently operate in Dubai.