Technical Assessment Humanitarian Use of Hawala in Syria

TECHNICAL ASSESSMENT
Humanitarian use of Hawala in Syria
Prepared for aid agencies conducting

cross-border operations
31 July 2015
SOMERSET HOUSE
STRAND, LONDON WC2R 1LA
TECHNICAL ASSESSMENT JULY 2015
TABLE OF CONTENTS
Acronyms and abbreviations i

About the author ii
EXECUTIVE SUMMARY iii
1. INTRODUCTION 1
1.1 Background and aim 1

1.2 Approach 2
1.3 Purpose and mechanics of IVTS 5
1.4 Regulation of IVTS 8
2. HUMANITARIAN FLOWS TO SYRIA: CAPACITY OF IVTS 21
2.1 Location 21
2.2 Liquidity 22
2.3 A typical transaction 23
2.4 Scale and type of transactions 25
2.5 Conclusion 26
3. IVTS INSIDE SYRIA: PROCESS AND SYSTEMS 27
3.1 Currency 27
3.2 Commission 28
3.3 Collection methods 29
3.4 Accountability 30
3.5 Conclusion 31
4. RISK ASSESSMENT 32
4.1 Defining risk 33

4.2 Evaluating risk – and Risk Matrix tool 34
4.3 Mitigating risk 35
4.4 Conclusion 38
5. CONCLUSION AND RECOMMENDATIONS 40
5.1 Ensuring a coherent approach 40

5.2 Recommendations 42
Attachment: Risk Matrix tool

Annex 1: IVTS regulatory context (laws and cash controls)
Annex 2: Sample contract for IVTS provider
Annex 3: Know Your Supplier Due Diligence checklist
Annex 4: Cash receipt template
© BEECHWOOD INTERNATIONAL LTD

Acronyms and Abbreviations
AML Anti-Money Laundering

AOG Armed Opposition Groups
BSA Bank Secrecy Act
CBR-TWG Cash-based Responses Technical Working Group
CBoS Central Bank of Syria
CDD Customer Due Diligence
CTF Counter-Terrorism Finance
CTP Cash Transfer Programming
DfID Her Majesty’s Government Department for International Development
ECHO European Community Humanitarian Aid Office
EDD Enhanced Due Diligence
ESCWA UN Economic and Social Commission for Western Asia
EU European Union
FATF Financial Action Task Force
FCA Financial Conduct Authority (formerly the Financial Services Authority)
FinCEN Financial Crimes Enforcement Network
FIU Financial Intelligence Unit
GCC Gulf Co-Operation Council
GoS Government of Syria
IQD Iraqi Dinar
IHL International Humanitarian Law
IS / Da’esh Islamic State / ad-Dawlah al-Islāmiyah fīl-ʿIrāq wash-Shām
IVTS Informal Value Transfer Systems
JAF Jaish al-Fateh
JOD Jordanian Dinar
KYC Know Your Customer
KYS Know Your Supplier
MASAK Mali Suçları Aratırma Kurulu (Turkish Financial Intelligence Unit)
MSB Money Service Business
MTO Money Transfer Operators
NGO Non-Governmental Organisation
NRC Norwegian Refugee Council
OFAC US Office of Foreign Assets Control
PEP Politically Exposed Person
SAR Suspicious Activity Report
STR Suspicious Transaction Report
SYP Syrian Pound
TCMB Türkiye Cumhuriyet Merkez Bankasının (Central Bank of the Republic of Turkey)
TL Turkish Lira
UNHCR United Nations High Commissioner for Refugees
UNOCHA United Nations Office for the Coordination of Humanitarian Affairs
UNRWA United Nations Relief and Works Agency
USD US dollar
WFP World Food Programme
hawala ‘transfer’ (Arabic), also denoting an informal system that facilitates domestic and international
monetary transfers
hawaladar a money transfer agent; this term is used interchangeably with ‘dealer’, ‘agent’ in the report
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About the author
The research team was made up of eight people with combined expertise across the main
areas covered in this report. The team leader and author was Dr Edwina Thompson, director
of Beechwood International.
Edwina has worked with humanitarian organisations, governments, and the military in complex environments
from South-Central Somalia, Sudan and Sri Lanka to Papua New Guinea, Pakistan, and Afghanistan. Through
grassroots research, she became a leading expert on the hawala system and its particular historical and
sociological dynamics in the Middle East and Horn of Africa. Her doctorate in Law on the subject was published
by Oxford University Press in 2011, entitled Trust is the Coin of the Realm: Lessons from the Money Men in
Afghanistan. Edwina has been an independent expert for various agencies of the United Nations, including as the
lead evaluator of UNDP Somalia’s Financial Sector Development Programme (2002-2007) which aimed to
strengthen the Somali remittance sector by increasing its compliance with international financial regulations, and
to lay the groundwork for the entry of a formal commercial banking sector within the country. In 2013, she was
the first Cash Coordinator to operate on behalf of UNOCHA in the Philippines super-typhoon response.
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EXECUTIVE SUMMARY
The United Nations recognises 13.5 million people as in need of humanitarian assistance inside Syria,
including 6.5 million internally displaced persons (IDPs) and an estimated 4.5 million people in ‘hard-
to-reach’ areas.1 One frontline medical agency estimates that 640,200 people are literally living under
‘long-term siege’ – intentionally denied basic necessities such as food, water and medicine and
freedom of movement by parties to the conflict. 2
Refugee flows to neighbouring countries have continued unabated: 1 in 5 people in Lebanon are
estimated to be a recently-arrived Syrian, taking the country close to having the population it was
expected to have in 2050; the number of registered refugees in Turkey has reached over 2 million;
and the Za’atari refugee camp is evolving into the sixth biggest city by population in Jordan, now
equipped with street names, districts and power lines. With no end to the conflict in sight, this is
classed as the biggest humanitarian crisis in the world today.
The conditions of those who are trapped or displaced inside Syria remain less well reported in the
media than the extent of the refugee crisis. Humanitarian agencies face particularly acute difficulties
in providing relief to the population in areas outside of government control, mainly due to access
constraints. This rapid assessment was prompted by the need to explore the possibility of sending
cash transfers to these areas instead of, or in conjunction with, material assistance.
Cash transfer programming (CTP) as an aid modality has proven to be a successful form of support to
Syrian refugees in neighbouring countries, primarily because of the choice it provides people in
deciding how to prioritise their needs. Cash also has the potential added benefit of extending the
coverage of aid agencies into hard-to-reach and besieged areas.
The banking system in opposition-held Syria is in a state of complete collapse; therefore, the only way
to transfer money into those areas is via the informal networks of ‘money men’ who have moved in to
fill the void. Despite the ambiguity surrounding their legal status, they operate openly in many areas,
making use of rented shop space, mobile phone technology, and a close-knit agent network –
mirroring the practices of what is termed ‘hawala’, translated simply as ‘transfer’, in Arabic-speaking
countries.
The three main objectives of this assessment are to:
 obtain a better understanding of how money currently reaches people within Syria,
with a particular focus on Informal Value Transfer Systems (IVTS) like hawala;
 assess the capacity of existing financial service providers to move a larger volume of
money in support of aid programmes inside Syria; and
 develop a risk management framework and recommendations on how humanitarian
stakeholders (INGOs, UN) could engage with IVTS (and specifically hawaladars) to
reach individual beneficiaries, while avoiding inadvertent contributions to criminal and
terrorist financing.
One of the greatest obstacles to achieving the objectives within the urgent timeframe (April-July) was
the universal reluctance of people to sharing information due to the extreme sensitivity of the subject
matter and the operating environment, where people’s lives are at risk. This is confirmed by some
international aid organisations creating literal firewalls between its operations from different border
points.
1
UNOCHA (2015) ‘Syrian Arab Republic: Key Figures’ (Oct)
2
Syrian American Medical Society (2015) ‘Slow Death: Life and Death in Syrian Communities Under Siege’ (Mar)
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The research methodology thus combined unique expertise and experience in the field of how money
flows in a crisis with further primary and secondary qualitative research as deemed necessary by the
team. Evidence on how the cash transfer systems to Syria work was collected from business people,
opposition fighters, Syrian citizens (inside the country, residing in neighbouring countries, and further
afield), regional government officials, and willing frontline aid practitioners working for international
non-government organisations (INGOs) or UN agencies, Syrian-initiated NGOs and Islamic charities,
so that solutions can be developed that will allow the flow of humanitarian money to continue in a
cost-effective and safe manner.
The primary audience for this assessment is the donors who subscribe to the ‘23 Principles and Good
Practice of Humanitarian Donorship’ and their partners on the ground.3 While much assistance is
facilitated by other sources – such as the Syrian diaspora, countries sympathising with the opposition,
and other political or religious solidarity networks – the focus here is on aid that is guided by the
international humanitarian legal principles of neutrality, impartiality and independence.4
Key findings
 The bulk of humanitarian money is transferred through hawala, and the existing
system does have the capacity to manage more potential volume of cross-border
transfers. Larger-scale cash transfer programmes are therefore feasible, but will depend on
the frequency of transactions, receiving location, available sources of liquidity, changes in the
conflict and the policies of neighbouring countries. A key area within the control of the
humanitarian agencies is how well they coordinate their efforts on scaling the aid response.
 The new geography of Syria is critical to understanding how money flows. While the
intricate patchwork of religious, sectarian, tribal and military divisions at the local level is a
sign that there is no one legitimate national representative of the Syrian people, the country is
at the broadest level fragmented along four main lines: Bashar al-Assad and the government;
Da’esh, which is aiming to build an Islamic State; the armed opposition groups (AOGs), which
include Syrian rebel coalitions and al-Qaeda-affiliated groups; and finally the Kurdish forces.
Each has developed its own systems of governance, and controls or contests its territory in
different ways. Despite this, Syria as a whole continues its legacy of acting as an important
hub in the Levant’s cash and commodity trade and smuggling routes, and new economic
interdependencies have formed between the various stakeholders. This reinforces the need
for a ‘Whole of Syria’ approach to humanitarian action.
 The long history of smuggling and sanctions in both Syria and Iraq contributes to
significant money laundering and terrorist financing vulnerabilities in the region’s
banking and non-bank financial sectors. This is made more challenging by the
inconsistent approaches of the governments concerned to enforce international and domestic
laws, and the fact that recent sanctions have contributed in their own way to the war economy
by encouraging new supply networks to form and bypass them. Wider regional and
international dynamics – including trade flows, impact of sanctions, the shifting nature of the
supply chains of key commodities – must be taken into account when examining the
mechanics behind cross-border financial flows. The difficulty of this undertaking raises the
important question of whether it is reasonable for donors to transfer the responsibility of
political economy and financial analysis to its partners, or treat the risk by being more
3
Accessed at: http://www.ghdinitiative.org/ghd/gns/principles-good-practice-of-ghd/principles-good-practice-ghd.html.
4
ICRC President concluded in 2014 that there is ‘no space for impartial and independent humanitarian action’ in Syria due to
the ‘highly manipulative’ political context and ‘extraordinary’ level of violence, violations and ‘unresponsiveness’ of all parties to
the conflict to respect International Humanitarian Law (IHL). Podcast: ‘Humanitarian Diplomacy at the Crossroads: On the Role
of Independent and Neutral Relief Action in Syria and the Middle East,’ News, Harvard University, Belfer Center for Science
and International Affairs, 25 April, 2014. This is a challenge that lies outside the scope of this report.
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involved in the mitigation.5 The same question applies to the common practice of INGOs in
delegating the decision-making on hawaladar selection to local partners.
 Mapping cash or value transfers reveals deep interconnections between different

stakeholders and systems in the crisis. IVTS relies on the delegation or exchange of debt
between agents located in different places, and so a transaction cannot be viewed in isolation
from this wider ecosystem. In its simplest form in the Syrian context, the liquidity pools at
both ends of a transaction link two seemingly disconnected groups: humanitarian actors and
business people. The former want to get money into Syria; the latter need to move their
profits outside of an environment dogged by insecurity. These business people in turn are
either banked directly by international banks in neighbouring countries and the wider region,
or indirectly via relationships with the money men. Therefore, the formal system is also
directly linked to informal economic networks. This offers a whole new different angle to the
de-risking strategy of international banks, whereby they close accounts and exit relationships
upstream with clients and corresponding banks deemed to operate in high risk jurisdictions.
 Current financial due diligence, which involves the use of automated screening
software to check providers against sanctions lists, does not adequately detect links to
terrorism. Sanctioned parties are known to use false personal information to try and evade
detection of their illicit activities, and/or use other non-sanctioned individuals to manage the
businesses they own – thus creating distance between them and the user. Insufficient
capacity exists within individual aid organisations to conduct the level of enhanced due
diligence (EDD) required on the business context in which the provider operates.
 Effective due diligence of financial service providers is complicated by the sheer

complexity of an environment which is fast-moving, and influenced by very different
country policies and regulatory regimes. The policies of neighbouring countries are critical
to creating an enabling environment for the safe passage of assistance and the financial flows
that support it. The Turkish government has demonstrated a consistent commitment to
ensuring the continued flow of humanitarian aid into Syria through cross-border humanitarian
operations since the start of the uprisings in 2011. Neighbouring governments now need to
pay more attention to enabling safe financial flows that support the movement of goods.
 Commodities are just as vulnerable as cash to the negative inadvertent effects outlined
by the Do No Harm project. All aid programmes involve the transfer of some resources into
a resource-scarce environment or to an area with people in need. Humanitarian relief to
those affected inside Syria has an unquestionable political dimension due to the tendency of
the warring parties to use its denial or provision as a sign of power – this is regardless of
whether it arrives in the form of commodities or cash. Therefore, the question should refocus
on how best to calibrate the different types of relief to meet the needs of people in different
areas, and how to conduct effective due diligence on the financial service providers engaged
in the facilitation of cross-border assistance.
5
According to the UK’s Department for International Development (DfID), the second largest humanitarian donor to Syria: ‘The
transfer of risks remains a common response in situations of insecurity, in particular by channelling funding through UN
humanitarian agencies, the ICRC and NGOs,’ while to treat the risk is ‘to seek either to reduce the likelihood of its occurrence
or reduce its impact. Policy dialogue, performance assessment frameworks and targeted capacity development’. DfID (2010)
‘Practice Paper: Working Effectively in Conflict-affected and Fragile Situations’ (Mar), pp.6-7. In a comparably complex
environment – Somalia – a comprehensive assessment of the CTP response there concluded that a ‘risk transfer’ approach
places unreasonable expectations on partners: ‘NGOs frankly have been left very much to fend for themselves … assuming the
responsibilities for success or failure on the ground’. Humanitarian Outcomes, ‘Final Evaluation of the Unconditional Cash and
Voucher Response to the 2011–12 Crisis in Somalia,’ Report commissioned by UNICEF, p.76. In this instance, there were
significant losses due to fraud, which could have been averted with a better understanding of the indigenous financial sector.
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Recommendations in this report highlight the central role of donor government departments in
managing the risks of transferring cash or value to the Syrian people at this time. It is not enough for
the development agencies to ensure that humanitarian money continues to flow safely to the intended
destination; donors must also draw deeply on their diplomatic, forensic and intelligence capabilities to
stay abreast of a rapidly changing and complex environment.
Report outline
Chapter 1 provides an extended introduction to the purpose, mechanics and regulation of the systems
involved in facilitating cross-border money flows into Syria. It includes a summary of controls and
their enforcement in each of the neighbouring countries – namely Turkey, Jordan, Lebanon and Iraq –
because of their importance to the movement of money or value. This is essential context for the
subsequent analysis and recommendations.
Chapter 2 explores how humanitarian money is flowing to opposition areas, which will inform whether
current IVTS have the capacity to accommodate more potential volume. Using the results from
consultations with aid agencies and money transfer agents, it maps out the location of current
providers and information on their liquidity, followed by details of a typical transaction involving aid
funds donated by Western countries to operations inside Syria, as well as the scale and type of
related expenditure.
Chapter 3 looks in more detail at the process and systems of IVTS inside Syria, which is intended to
help aid agencies navigate how to engage with a specific provider. It includes information on the
costs involved in a transaction due to a fluctuating currency and varied commissions, a breakdown of
how people tend to collect money at the Last Mile, and an overview of options to increase
accountability.
Chapter 4 assesses the risks involved in engaging with IVTS, which will vary in probability and impact
depending on the area. In recognition of the dynamic and thus changing situation on the ground, it
also offers humanitarian agencies several tools to use in their internal decision-making.
Chapter 5 concludes with specific recommendations and a suggested concept for the facilitation of
productive dialogue surrounding cash programming in its early stages.
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1. INTRODUCTION
1.1 BACKGROUND & AIM
Humanitarian assistance delivered from neighbouring countries into Syria plays a key role in
alleviating the suffering of people who remain inside the country. UN Security Council Resolution
2191 decided that humanitarian organisations could conduct cross-border operations until 10 January
2016, with notification to the Syrian authorities, using crossings already in use as originally authorised
by 2014 resolutions 2139 (Feb) and 2165 (Jul), and two with Turkey (Bab al-Salam, Bab al-Hawa),
one with Iraq (Al-Yarubiyah), and one with Jordan (Al-Ramtha). There is widespread concern,
however, that insufficient or inappropriately targeted aid is still being delivered. This is in part due to
the regular closure of many key border points, bureaucratic procedures, safety and security concerns,
and the presence or activities of terrorist groups.
In response, humanitarian agencies are exploring the feasibility of sending cash transfers because of
their flexibility (people can decide for themselves what they need most and what to spend it on),
efficiency (both cost and speed, and the multiplier effects on the local economy), and ability to restore
a sense of control and dignity – vital when people have lost so much. Cash assistance programmes
have been used widely to support Syrian refugees in neighbouring countries, and to support
Palestinian refugees within Syria,6 but it has neither been used at scale cross-border, nor within
opposition-controlled areas of Syria. Cash may have the added benefit of extending the coverage of
aid agencies into hard-to-reach and besieged areas.
The banking system in opposition-held Syria is in a state of complete collapse; therefore, the only way
to transfer money into those areas is via the informal networks of ‘money men’ who have moved in to
fill the void. The humanitarian sector has experienced the positive potential of informal value transfer
systems (IVTS) like hawala to disburse money to beneficiaries in Afghanistan and Somalia, and
therefore must assess whether a similar mechanism could be used for Syria. Especially in remote
and crisis-affected contexts, IVTS facilitate a large proportion of inbound and domestic money flows,
including the provision of services to the diaspora wishing to send remittances home.
In light of the potential shift in aid modality, and changes in people’s access to the formal financial
system, the aim of this rapid assessment is thus to achieve the following objectives:
 to obtain a better understanding of how money currently reaches people within Syria
 to assess the capacity of existing financial service providers to move a larger volume
of money in support of aid programmes inside Syria
 to develop a risk management framework and recommendations on how humanitarian
stakeholders (INGOs, UN) could engage with IVTS (and specifically hawaladars) to
reach individual beneficiaries, while avoiding inadvertent contributions to criminal and
terrorist financing
6
For example, UNRWA (2014) ‘Cash assistance in Syria: a vital lifeline for the most vulnerable’ (17 Oct), accessed at:
http://www.unrwa.org/newsroom/features/cash-assistance-syria-vital-lifeline-most-vulnerable; International Rescue Committee
(2012) ‘Assessment Report Cash Transfer Program to Syrian Refugees in Jordan’ (Sep-Oct); (2014) ‘An Impact Evaluation of
the 2013-2014 Winter Cash Assistance Program for Syrian Refugees in Lebanon’; IFRC Cash program for Syrian refugees in
Jordan, video accessed at: http://www.cashlearning.org/resources/video-library/cash-program-for-syrian-refugees-in-jordan
© BEECHWOOD INTERNATIONAL LTD 1

1.2 APPROACH
The research methodology combines unique expertise and experience in the field of how money flows
in a crisis with further primary and secondary qualitative research as deemed necessary by the team.
While it is widely known that financiers across the world are reluctant to share with an outsider much
of their business practices under the basic principle that knowledge is power, the methods of running
a business and moving cash or value in a conflict zone are by their very nature defined by secrecy,
indeterminate legal status, and competitive or even divisive practices. This has been proven
extensively in the academic literature of anthropology, criminology and economic sociology. 7 One of
the money dealer’s most important survival strategies within a ‘trust network’ is a prime example of
the desire and ability to resist direct observation. 8
This research benefited from the team leader’s deep experience in mitigating the difficulties of such
an environment, following in-depth interviews with representatives of hundreds of hawala operations
and trading networks in the Middle East and Horn of Africa over the past decade, inspection of their
records, and access to classified information viewed under appropriate security clearance. Another
member of the research team also has an intimate understanding of how terrorists raise, move, store
and use money, which is critical to informing the threat landscape presented in this report. The
remaining members of the team are either natives of Lebanon, Syria, Jordan or fluent in Turkish and
Arabic.
On the whole, there is a seemingly unprecedented level of reticence on behalf of international aid
workers to share information in this context due to the extreme sensitivities in the operating
environment, where people’s lives are at risk. This is confirmed by some organisations creating literal
firewalls between its operations from different border points. There was thus an inherent risk in
conducting this research that agencies would not share information, especially given the short
duration.
The team was able to build trust with several INGOs and the largest Syrian-initiated networks, while
others wanted to share more once they had seen the quality of the work produced. This indicates that
the data collected for this assignment should be shared urgently, and follow-up discussions should be
used to build on the data. Overall, 75 interviews were conducted with aid workers (67 NGO and 8
UN), mostly on an individual basis with finance and livelihoods personnel, but on a number of
occasions the NGOs offered group conference calls which included members of their finance,
security, protection, livelihoods, and senior management teams. Those coordinating cash transfers
inside Iraq and cross-border were particularly helpful sources of information.
Syrian citizens were generally more open and willing to share information once they understood that
the purpose of the research was to help aid organisations reach a greater number of beneficiaries in a
potentially more timely fashion by sending cash transfers. We used a snowball sampling technique
where existing study subjects recruit future subjects from among their acquaintances, and began with
the research team’s own personal and professional networks. Several Syrians living under siege
were interviewed using Viber (smartphone messaging application) regarding the changing living
conditions and methods for moving money, while 17 in-depth interviews were conducted with
7
See for example Jeffrey Sluka (1990) ‘Participant Observation in Violent Social Contexts,’ Human Organisation, 49: 114;
William Chambliss (1975) ‘On the Paucity of Research on Organized Crime: A Reply to Galliher and Cain,’ American
Sociologist 10: 39; Dennis Rodgers (2001) ‘Making Danger a Calling: Anthropology, Violence and the Dilemmas of Participant
Observation,’ Development Research Centre, London School of Economics (September 2001); Antonius Robben & Carolyn
Nordstrom, ‘The Anthropology and Ethnography of Violence and Sociopolitical Conflict,’ in Nordstrom & Robben (eds.) (1995)
Fieldwork Under Fire: Contemporary Studies of Violence and Survival (Berkeley: University of California Press), and Edwina
Thompson (2010) Trust is the Coin of the Realm: Lessons from the Money Men in Afghanistan (Oxford University Press),
Chapter 1 ‘Method and Theory’, pp.1-26
8
Thompson, Trust is the Coin of the Realm, Chapter 4 ‘Hawala and the Politics of Survival’, pp.116-140

displaced Syrians in neighbouring countries who still send money home, and another 20 in-depth
interviews were conducted with Syrians living in the UK, United Arab Emirates and the US regarding
their experience of transferring cash and providing charitable support during the conflict. They
painted a picture of genuine risk to their lives and property when dealing with money.
Due to the above reasons, every effort has been made to respect the confidentiality of information
that was provided, and use it only to inform a risk management process which all aid agencies can
benefit from by customising to their specific area of operation within Syria. The points highlighted in
Chapter 4 on risk will necessarily vary in significance to aid workers in terms of probability and impact
depending on the area. The tools have been developed in recognition that the information is
imperfect, and that they will provide the necessary enduring guidance for agencies as they make
decisions in this space.
In order to meet the first objective of the research, we initially designed an online survey for the Syrian
diaspora sending remittances back to family and friends. After a sample of 50 respondents was taken
from people in Saudi Arabia, the UK, Turkey and Jordan, however, it became clear that they had a
predominantly ‘front office’ view of the transactions, rather than the ‘back office’ detail we were looking
for. At the same time, the Norwegian Refugee Council (NRC) released a similar set of surveys as
part of wider research into remittance modalities in Syria. NRC kindly agreed to share the iterative
results, so we were able to leverage this work and integrate relevant findings into the paper. 9
Structured questionnaires were produced for the following stakeholder groups to establish how, if at
all, the process and systems involved in transferring money informally into Syria differ from other
IVTS: both registered and unregistered Money Service Businesses (MSBs), Money Transfer
Operators (MTOs) or hawaladars and Middle Eastern and Turkish business people who were willing
to share information about illicit finance. Three Islamic charities working in rural Idleb, urban and rural
Aleppo and Saraqib were interviewed in a similar vein. These charities receive funding from Bahrain,
Kuwait, Qatar and Saudi Arabia, and combined, their annual operating budgets are USD6.3 million.
In areas held by Jaish al-Fateh (JAF)10 in northern Syria, we interviewed all 17 money transfer agents
whose networks cover Idleb (urban 100% and rural 80%), Aleppo (urban 40%, and rural 70%), Jisr al-
Shughur, and Saraqib. A separate analysis of the areas controlled by Da’esh (known in Western
media as ISIS or IS) was also conducted to get a sense of the conditions there. Five money transfer
agents who operate mobile phone shops were interviewed in Al-Bab, Ar-Raqqa and Menbaj.
In Jordan, Lebanon and the UAE, we used structured interviews with 20% of the largest MSBs known
to facilitate transfers to Syria, and those with ethnic ties to Syria via their owner/operators. The latter
companies were predominantly smaller in turnover when compared to the wider market in each
location, but had much more grounded insights into the current operating realities of Syria. In Jordan
and UAE, we also relied on people close to the industry, but deemed independent, to review our
results. Questions were asked on the following subjects:
- Pre-war (2011) and current relationships with Syrian correspondent MSB

- Locations and capacity of partner (volume) under different conditions to remit what currencies
- Fee structure negotiable at what threshold
- Settlement procedure with Syrian counterpart
- Reconciliation procedure once beneficiary receives money
9
Roger Dean (2015) ‘Remittance Modalities in Syria: What Works, Where and How,’ Norwegian Refugee Council (Jun)
10
JAF, or the Army of Conquest (‫)جيش الفتح‬, is a military operations room that consists of numerous Syrian Islamist rebel factions
mainly active in the Idleb governnorate, with some factions active in the Hama and Latakia governorates. JAF captured Idleb
city on 28 March 2015, and allegedly around 50 government soldiers defected to join.

Specific questions for the Syria-based MTOs and hawaladars noted above included:
- What happened to pre-war registered entities that are no longer in operation

- Percentage of liquidity derives from what sources
- Availability of currency under the different conditions
- Description of taxes by governing authority, and trends
One-on-one interviews were also conducted with 15 Syrian businessmen in steel, iron, automotives
and food who relocated to Turkey after the destruction of their metal workshops and other related
industrial bases in Aleppo.
In order to gain a better understanding of the capacity of hawaladars to remit money for CTP, the first
step was to gauge a baseline view of existing humanitarian flows, and a snapshot of the projected use
of IVTS for cross-border payments. Therefore, an anonymous online survey was designed to capture
open-ended responses and some quantitative information from the humanitarian community. The
survey elicited 11 responses from Turkey, and two from Jordan, representing a collection of INGOs
and local implementing partners. Two of the respondents from Turkey recorded no transactions,
however commented on the reliability of the systems in place. Therefore no quantitative data shows
for them.
No identifying information was collected deliberately to give comfort to the respondents of their
anonymity. This clearly limits the extent of the analysis, but some useful trends have been identified
and conclusions drawn. While for Turkey the survey does not appear to be statistically robust, given
that all humanitarian organisations with cross-border operations are using IVTS to transfer money, in
Jordan, very few humanitarian agencies actually operate this way, having mainly concentrated on the
Syrian refugee population living in Jordan. The sample therefore included one response from a
government contractor that kindly shared its quarterly figures so that a comparison could be made
between humanitarian and other aid flows. The data is represented in a separate chart to show the
difference in scale.
We also made use of the feedback provided to the Turkey Cash-based Responses Technical Working
Group (CBR-TWG) by three members in July 2014 during its efforts to collate information on the use
of IVTS. This data is compared with what we learned from talking to the hawaladars in Chapter 2.
Wherever possible, an attempt has been made throughout the report to corroborate or challenge the
anecdotal information gathered during the research. This was done by drawing on existing expertise
and experience in the IVTS field and humanitarian cash coordination. The team leader also took the
opportunity to spend significant time with specialists within the law enforcement community to review
the draft terms of the contract with hawaladars, and to piece together the different legislation and
regulations governing cash and value transfers in the region. An EU liaison within MASAK (or Mali
Suçları Aratırma Kurulu), the Turkish Financial Intelligence Unit, was particularly helpful in providing
real time updates on changes to guidance on cash controls.
For the remainder of this chapter, we will review how an IVTS works, including its purpose and
mechanics, and the regulatory framework within which Syrian providers sit at the international,
regional and domestic levels. This should be read in conjunction with Annex 1. A short overview of
current sanctions on Syria is also included because of the dual compliance concern of anti-money
laundering and counter-terrorism financing (AML/CTF) and sanctions.

1.3 PURPOSE AND MECHANICS OF IVTS
BOX 1: IDENTIFYING AN IVTS

An “informal value transfer system” refers to any system, mechanism, or network of people that receives
money for the purpose of making the funds or an equivalent value payable to a third party in another
geographic location, whether or not in the same form. The transfers generally take place outside of the
conventional banking system through non-bank financial institutions or other business entities whose primary
business activity may not be the transmission of money.
COMMON BUSINESSES OPERATED IN CONJUNCTION WITH AN IVTS

Import/export trade Jewellery (gold, precious stones) Telecommunications
Currency exchange Used Cars Rugs/carpets
Travel and related services Car rentals
US Department of Treasury Financial Crimes Enforcement Network (2003) FinCEN Advisory Issue 33: Informal Value
Transfer Systems (March)
In extreme crises, when the banking system is collapsed or restricted, money is mostly delivered to
people via an informal network or ‘value transfer’ system – known by regulators as ‘IVTS’. In many
parts of the Arabic-speaking world, such as the Middle East, South Asia and Horn of Africa, this
system tends colloquially to be called al-hawāla.
From the customer’s perspective, within minutes of a hawala representative – or hawaladar –

receiving cash from a remitter (the ‘first mile’ of the transaction), the beneficiary and local agent in the
destination country (or the ‘last mile’), are notified, and the pay-out can be made immediately in US
dollars (USD) – often the preferred hard currency in a crisis – or the local currency. At a later stage
‘clearance’ occurs when the local agent in the destination country receives any payments required to
balance his books.
In short, hawala is an informal method of debt settlement, built upon a mutual trust of each party to
the transaction – in the classical definition, it refers to the payment of a debt through the transfer of a
claim.11 For centuries it has been widely used by traders to transfer value between distant locations,
while avoiding the inconvenience and risk of transporting money. Hence, a merchant would settle the
payment for an assignment by delegating his debt to another merchant against whom he has a prior
claim, through the sale of a commodity on credit. In such a transaction, no physical transfer of money
takes place; only a delegation or exchange of debt.
Today an IVTS continues to rely on personal connections between operators in different locations,
usually across borders, and is typically used for diaspora remittances to areas where bank
penetration is low, restricted or untrusted. Figure 1 depicts the two main flows that facilitate such a
transaction: information (i) and money ($). The purpose of the transaction in this case is two-fold: (1)
a migrant worker in Saudi Arabia wants to remit money home to family in Syria; (2) a father in Syria
wants to pay for the university fees of his child studying abroad in Saudi Arabia. Hawaladars take
care to manage cash pools in the different locations to prevent the need for a physical cross-border
movement of cash; therefore, if the child was being schooled in Germany, this would be settled in a
more complex transaction involving wire transfers, controlled from a clearing house in a location such
as the United Arab Emirates or Kuwait. In reality, there can be many more relationships involved in
the debt settlement.
11
Edwina Thompson (2008) ‘Introduction to the Concept and Origins of Hawala,’ Journal of the History of International Law 10:
83-118

Figure 1: Typical debt settlement from migrant remittance
In relation to modern-day Syria and its neighbouring countries, the term hawala is also applied to
formally registered MSBs or Payment Institutions because the same outcome is achieved for the
customer – an instant money ‘transfer’ without the delays or onerous paperwork of the banks.12
For users wishing to transfer money that has been obtained legitimately, benefits include: cost
effectiveness, speed/efficiency, reliability, cultural familiarity, and simplicity. An additional benefit for
users with money that has been obtained illegitimately includes the lack of transparent paper trail, or
the layers that the system provides – wittingly or not – to conceal the origin of the funds.
As has been shown in expert reports and opinions, understanding the settlement process is vital to
unpacking how an IVTS can offer such an attractive service – both for licit and illicit purposes.13 The
following is a list of some of the main techniques used to settle the debt:
 Transaction offset: in an established network, transactions can be coordinated between

different operators so that amounts sent and received can balance, requiring no additional
actions to settle. This is the simplified picture presented in Figure 1.
 Wire transfers: a straight forward process, which may be disguised as part of normal
business operations, or a transfer between personal accounts. The settlement could be to
pay the debt of another party who is owed an equivalent amount.
 Under/over-invoicing of goods: goods can be shipped and under/over-valued in order to
settle the balance owed between operators. This is common because IVTS usually run other
12
A wire transfer of funds using banks involves fees charged to the sender and receiver, may take from two to seven days to
complete, and may be delayed or lost. Funds moved through IVTS are available within 24 hours, with minimal or no fees
charged to the participants.
13
Examples include: FATF (2013) ‘The Role of Hawala and Other Similar Service Providers in Money Laundering and Terrorist
Financing’ (Oct), Richard Ballard (2003) ‘Hawala Transformed: Remittance-driven Transnational Networks in the post-Imperial
Economic Order,’ Revised version of a paper presented at a World Bank/DFID International Conference on Migrant
Remittances: Development Impact, Opportunities for the Financial Sector and Future Prospects, London (9–10 Oct); Arya
Hariharan (2008) Hawala's Charm: What Banks Can Learn From Informal Funds Transfer Systems,’ William & Mary Business
Law Review 3(1); Ryan Hodge (2013) Informal Value Transfer Systems: A Financial Institution’s Perspective,’ ACAMS (Sep);
Samuel Munzele Maimbo (2003) ‘The Money Exchange Dealers of Kabul’, World Bank Working Paper 13 (World Bank:
Washington D.C.); Thompson, Trust is the Coin of the Realm, and subsequent expert guidance to the UN.

businesses in conjunction with the money transfer (see Box 1 and Lebanon case study
involving car dealerships and consumer goods).
 Pre-paid cards: these cards (pre-paid credit, mobile credit, gift cards) represent negotiable
instruments that effectively store value.
 Courier services: hard currency or precious metals and gems may be physically transported
in everything from cars and containers to suitcases and pockets, in bulk or through cross-
border ‘smurfing’, where the amount is divided across several individuals transiting borders.
Gold is a particularly reliable and familiar form of transportable payment in the Middle East –
home to the world’s largest gold souks (or ‘markets’). During a conflict, or when fiat
currencies are highly devalued, it is especially useful and nearly impossible to trace its origin
– in the Syrian crisis, some people have converted their earnings into gold. There are reports
that a 1 Kilo bar of 24 Carat Gold can fit undetected inside an iPhone 6 cover; thus this is
some people’s preferred method of transport.
Moving money physically only happens periodically in the settlement process (i.e. to settle the debt
between agents where there is an uneven pool of cash at one end) at a later time, and using a
combination of trade, cash courier and wire transfers – often between banks that are located in a
different location such as the GCC countries. It is therefore critical to understand a financial network’s
trade linkages.
It is possible to identify three levels of operation in a hawala business on the basis of the roles carried
out by different levels of agents, the management of funds within the network, and the purpose of the
transactions:
 Retail – small operators moving relatively small amounts on behalf of individuals, often using
his known circle of friends and family members or one of the wholesale operators;
 Wholesale – larger multi-ethnic operators moving millions of aggregated dollars globally,
directly or via intermediaries, bulking transactions from smaller operators;
 Corporate – the settlement of large business transactions or of business debts, again using
clearing houses such as Dubai.
Almost all of the NGOs based in the neighbouring countries of Syria appear to be using retail hawala
agents, and it is unclear which wholesalers they are in turn connected to, if any. This is partly due to
the very limited information that is collected on the agents – sometimes only a first name and phone
number.14
Unlike other conflict contexts, many of the agents who are engaged seem to be operating a very basic
model of straight-line cash couriers, which is limited to delivering money close to the borders inside
Syria due to safety concerns. While there is the most personal risk attached to this method, it is the
safest option for avoiding the risk of the liquidity being provided by an illicit source, because the aid
organisation can withdraw the cash from a bank, and hand it over, rather than rely on funds in-country
which have an unknown origin. This constitutes a ‘closed corridor’ from First Mile to Last Mile with
hard currency transfers passing in a way that the collection and distribution of funds can be audited at
both ends. The preference of most aid agencies interviewed during the research, however, is to
deposit the money with an agent once it has already been paid out at the final destination, so these
benefits would not accrue to those NGOs using the couriers in a reimburse-only arrangement.
Throughout this report, we mainly focus on the use of registered or unregistered hawaladars, and
registered MSBs, rather than straight cash couriers. The latter category includes the practice of using
14
In cases where full names and dates of birth are recorded to be checked against compliance software, NGOs appeared to
trust that the agent was providing accurate details. This is problematic because, if someone is designated, they are unlikely to
share their true identity.

individuals travelling to the area to provide intermediation for cash transfers and payments inside
Syria. While common, this method has obvious limitations, has proven less reliable for bulk NGO
payments than for the transport of personal remittances, and is likely to be considered as exempt
from the AML regulations of source countries like the UK, where activities that are engaged in only on
an occasional or very limited basis do not qualify as a money transmission service15.
1.4 REGULATION OF IVTS
International
In recent years, the Financial Action Task Force (FATF), an inter-governmental policy-making body
charged with setting standards and promoting effective implementation of legal, regulatory and
operational measures for combating money laundering and terrorism finance, has issued guidelines
on how to supervise hawala-like operations. Their recent evaluation found that ‘the globe has been
largely ineffective’ at implementation of the guidance.16
BOX 2: INTERNATIONAL OBLIGATIONS

Alternative remittance systems [or IVTS] are financial services, traditionally operating outside the conventional
financial sector, where value or funds are moved from one geographic location to another. Each country should
take measures to ensure that persons or legal entities, including agents, that provide a service for the
transmission of money or value, including transmission through an informal money or value transfer system or
network, should be licensed or registered and subject to all the FATF Recommendations that apply to banks
and non-bank financial institutions. Each country should ensure that persons or legal entities that carry out this
service illegally are subject to administrative, civil or criminal sanctions.
Financial Action Task Force, Special Recommendation VI on Alternative Remittance Systems
Transactions still fail to set off red flags, in part because terrorism-related transfers are so small thus
they appear unremarkable among the millions of transactions, and also because they are hidden
amongst legitimate transfers.17
Concerns of financial regulators and law enforcement remain the:
 spatially dislocated profile and extensive local and transnational connections of IVTS, which
make it hard to find the centre or control;
 delivery of funds in consolidated tranches, which often masks the point of origin;
 client relationships that are based on trust and repeated interaction, rather than on the
approval of formal Know Your Customer (KYC) guidelines;
 accounting and book-keeping systems that are unique to each network, which makes the task
of auditing a painstaking and difficult process;
 interconnectivity with international banks, which creates vulnerabilities in the system;
 level of political accommodation IVTS enjoy because they can facilitate public corruption by
integrating criminal profits of officials into the banking system indirectly;
 tendency of dealers not to distinguish on moral grounds between different sources and types
of funds;
 difficulties involved in distinguishing the overlapping and insidious connections of licit and illicit
transfers;
15
See JMLSG Board (2014) ‘Guidance in respect of Money Service Businesses’ (28 May)
16
FATF (2013) ‘The Role of Hawala and Other Similar Service Providers in Money Laundering and Terrorist Financing’ (Oct),
p.11
17
Aimen Dean, Edwina Thompson and Tom Keatinge (2013) ‘Draining the Ocean to Catch one Type of Fish: Evaluating the
Effectiveness of the Global Counter-Terrorism Financing Regime,’ Perspectives on Terrorism 7(4) (August): 62-78

 mixing of money transfers with trade in valuable commodities in the settlement process;
 informal structures and systems, which can provide criminals with the cover of anonymity and
an opportunity to launder money.
US
The USA PATRIOT Act gives US regulators oversight of all dollar transfers by making it compulsory
that they go through US correspondents. In reality, this means that anyone using USD and found to
be abusing America’s AML/CTF regulations is liable for prosecution.
April 2013 marked the first time that the US Department of the Treasury used Section 311 of the
PATRIOT Act against a non-bank financial institution. Two Lebanese exchange houses – Kassem
Rmeiti & Co. For Exchange (Rmeiti Exchange) and Halawi Exchange Co. (Halawi Exchange) – were
named as foreign financial institutions of primary money laundering concern. This followed the
designation of two other exchange houses in Lebanon – Hassan Ayash Exchange and Ellissa
Exchange – and the Lebanese Canadian Bank which held their accounts, in January and February
2011 respectively.
Within the US, any individual or group of people engaged in conducting, controlling, directing or
owning an IVTS is operating as a ‘financial institution’. Therefore, IVTS operators must comply with
all Bank Secrecy Act (BSA) requirements, which include the establishment of an AML programme,
registration with the Financial Crimes Enforcement Network (FinCEN) as an MSB, and compliance
with the record keeping and reporting requirements, which include filing suspicious activity reports
(SARs).
OFAC Licence No. 11 authorises US money transmitters, depository institutions, registered brokers or
dealers in securities to transfer funds on behalf of NGOs (US or third country) to Syria, provided that
the transfer does not interact with a sanctioned entity or Specially Designated Nationals (SDN). 18
Despite this general licence, banks have evaluated the risk as too high from a regulatory and
reputational standpoint.
One of the primary concerns is that funds are rarely transmitted directly to the ultimate beneficiary in a
fragile or conflict-affected state such as Syria. As mentioned in 1.3 above, instead of making straight-
line, direct bank-to-bank payments, charities tend to rely on a combination of local correspondent
banks (see Box 3) and the third-party ‘Clearance’ system of remittance companies that facilitate the
very last stage in the payment. These companies use settlement mechanisms based on trade flows
to reimburse the in-country agents.
This is where the situation becomes problematic for humanitarian actors and their banks because
effective due diligence would require an understanding of the trading companies that are often used
to help settle the cash transfers. Some of these companies, or suppliers within their supply chain, will
be under sanction, and have links to the government, which is now the longest-standing member of
the US government’s list of ‘State Sponsors of Terrorism’.19
18
US Department of the Treasury (2013) ‘OFAC: Executive Order 13582 of August 17, 2011 Blocking Property of the
Government of Syria and Prohibiting Certain Transactions with Respect to Syria’. OFAC Licence No. 6 authorises the same
institutions to process personal remittances to or from Syria on behalf of an individual ordinarily resident in Syria, under the
same conditions. EU/UK licences are also available on request if an organisation’s actions are subject to sanctions. See
‘Table 1: key prohibitions, licences and licence granting authorities under the EU and US Syrian sanctions and exports control
regime’ for more detailed guidance, in British Bankers’ Association, Disasters Emergency Committee and Freshfields
Bruckhaus Deringer LLP (2013) ‘Getting aid to Syria: Sanctions issues for banks and humanitarian agencies’ (Dec), pp.8-9.
19
US Department of State (1979) ‘State Sponsors of Terrorism’ (29 Dec). This classification resulted in a ban on US arms
exports, foreign assistance, and the export of any goods or technologies that may contribute to Syria’s military capability.
Executive orders extended US sanctions in 2003 and 2006, prohibiting all US exports to Syria (excluding food and medicine),
US businesses from operating or investing in Syria, and certain Syrian citizens and entities from accessing the US financial

BOX 3: CORRESPONDENT BANKING

Governor of the Bank of England and Chief Financial Officer of the World Bank Group explain that ‘even a
global financial institution cannot have operations in every city, town and village. Hence the need for
“correspondent banking”, which allows a local bank to give its customers access to a faraway institution’s
services’, such as currency exchange or international money transfer.20 While this provides an indispensable
link between developing economies and the international banking system, global banks have experienced large
fines in recent years due to some local correspondents facilitating the activities of drug gangs and terrorists.
This concern increases as the risk profile of the partner bank on behalf of which transactions are being
executed on a correspondent basis increases; for example, its predominant geography of operation or the
destination to which payments are instructed.
Since the uprisings in 2011, the US, Arab League, EU and individual countries have placed further
severe sanctions on Syrian businesses, individuals, and entities. These entities include the Central
Bank of Syria (CBoS), the largest state-owned banks, and the Syrian petroleum industry. 21 The EU
prohibits the provision of certain financial services, including currency services for the Syrian
government, and the direct or indirect sale, purchase, or brokering of gold, precious metals, and
diamonds.22
Despite not being a member of the Arab League or the EU, Turkey has also imposed sanctions on
Syria in line with those drawn up by these international institutions. This is particularly salient given
that bilateral trade between the two countries totalled USD2.5 billion in 2010, with the majority of
Syria’s export revenue benefiting the government. 23 Turkish sanctions are therefore viewed as an
important avenue for limiting Assad’s ability to access the global banking system.
In spite of initial concern about its trade links with Syria, Jordan has taken a strong stance and
committed to implementing the sanctions.24 In contrast, both Iraq and Lebanon have declared they
would not enforce the sanctions. Lebanese banks insist they are not legally restricted from doing
business with Syrian financial institutions; and yet, in order to maintain correspondent relationships
with European and American banks, many Lebanese banks have been electing to exit relationships
with Syrian companies.25
Fundamental fears of international banks remain: fines triggered by (particularly US) investigations;
headlines about ‘financing terrorists’; and potential loss of access to the US market/USD system.
Regional
The regulatory and legislative environment under which the Syrian financial networks operate in the
region is key because of the importance of neighbouring countries to the movement of money or
value. Below is a short summary of the regulations on cross-border cash flows and money transfers –
and their enforcement – in Turkey, Jordan, Lebanon and Iraq. This is followed by a specific focus on
regulation within Syria. Readers should refer to Annex 1: IVTS regulatory context (laws and cash
controls) as an aid to this section.
system. Jeremy Sharp (2011) ‘Unrest in Syria and US Sanctions Against the Assad Regime,’ Congressional Research Service
(Aug)
20
Mark Carney and Bertrand Badré (2015) ‘Keep finance safe but do not shut out the vulnerable,’ Financial Times (2 Jun); and
Beechwood International, Safer Corridors.
21
US Department of Treasury (2015) ‘OFAC FAQs: Other Sanction Programs- Syria Sanctions,’ accessed at:
http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#syria_whole
22
US Department of State (2014) ‘Countries/Jurisdictions of Primary Concern: Syria,’ Bureau of International Narcotics and
Law Enforcement Affairs, accessed at: http://www.state.gov/j/inl/rls/nrcrpt/2014/supplemental/228020.htm
23
Randa Slim (2011) ‘Where’s Syria’s Business Community?’ Foreign Policy (5 Aug)
24
BBC (2011) ‘Syria Sanctions: Arab League Tightens Grip’ (27 Nov)
25
Dominic Evans (2012) ‘Sanctions Weigh on Lebanon – Syria Banking Ties,’ Reuters (8 Feb)

Turkey
Cross-border cash flows

In Turkey, there is no restriction on the importation of currency – a declaration is only required if
requested by an official such as a customs officer. For cash exported to other countries, it is a legal
requirement to declare all money in excess of EUR10,000, or the equivalent in other currencies. If
there is no suspicion of criminality, the currency is permitted to proceed. This represents an
amendment to Decree No. 32 on the Protection of the Value of Turkish Currency, which establishes
certain limitations to the amount of cash to be taken to other countries through customs points. 26
The Ministry of Finance inter alia is working on the actual mechanics of how the system will operate –
i.e. whether to include negotiable instruments, how declarations are to be made, the design of any
declaration forms to be introduced, who will have responsibility for the acceptance and retention of the
declarations, and how they are to be communicated to MASAK.27 The Ministry has advised that it will
issue a Communiqué (tertiary legislation) detailing these measures.
Cross-border money transfers

During the research, there were only two licenced money transfer businesses in Turkey permitted to
remit money abroad – Western Union and MoneyGram. Twelve years ago, Western Union secured a
deal with the Turkish Post and Telegraph Company, which effectively made all post offices also a
Western Union outlet. Commercial banks in their own right can transfer money internationally but all
transfers go via the Central Bank (TCMB).28
In 2013, Turkey passed Law No. 6493 in order to regulate and monitor the procedures of payment
service providers. The law came into effect in late June 2015, and states that any person or
organisation carrying out payment services must obtain a license from the TCMB. This will therefore
apply to any IVTS operating in Turkey. In order to become licensed, a number of stipulations must be
met, including appropriate risk management procedures, at least Turkish Lira (TL) 5 million of paid-in-
capital in cash, free of any collusions, and a transparent governance structure. Any persons and
institutions engaging in payment services without a licence, or failing to cooperate with the TCMB’s
oversight requests, is subject to sanctions under the law. 29 Given the high working capital
requirements, smaller money dealers are unlikely to be incentivised to register.
When we asked Turkish officials whether existing providers could now apply for a licence through the
new legislation, the response was negative; they cited the pre-existing illegality of their operations.
When presented with the same challenge in 2002 due to the popularity and prevalence of hawala, the
Central Bank of the UAE introduced light regulations, which have been gradually increased over the
years – this has brought many more dealers than anywhere else in the region into the regulated
sphere, and indicates that the Turkish Government may wish to reconsider its position.
26
The movement of cash into and out of Turkey is governed by two pieces of legislation: Law No. 1567 Regarding the
Protection of the Value of Turkish Currency, published in Official Gazette No:1433 (1930); and Law No. 5549 on the Prevention
of Laundering Proceeds of Crime (2006). If subsequent regulations contain provisions that conflict with any underlying
legislation or statutes they will not be enforced. Customs officials informed us that anything released by the Government that
seems to contradict these pieces of legislation should therefore be ignored. This includes Circular 2005/1 'Cash Controls at
Customs' Issue: 87375112/010.06, issued by the Ministry of Customs and Trade in April 2015, which introduced some
ambiguity and thus confusion around the controls, appearing to make it easier to bring cash legally into the country. For
example, it contains the sentence “passenger cannot be compelled to make a declaration at customs”, which implies that
customs officials no longer possess the authority to demand cash disclosures.
27
MASAK was established following the country’s criminalisation of money laundering in the 1996 Law No. 4208 on the
Prevention of Money Laundering.
28
FATF (2007) ‘Third Mutual Evaluation Report, Anti-Money Laundering and the Combating of Terrorism: Turkey,’ (23
February), accessed at: http://www.fatf-gafi.org/media/fatf/documents/reports/mer/MER%20Turkey%20full.pdf
29
TCMB (2013) ‘Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions’,
accessed at: http://www.tcmb.gov.tr/wps/wcm/connect/3deb8069-ce8d-4ba7-a31d-
e075259aa60a/6493.pdf?MOD=AJPERES&CACHEID=3deb8069-ce8d-4ba7-a31d-e075259aa60a

Enforcement
In October 2014 FATF removed Turkey from its list of high-risk and non-cooperative jurisdictions.30
Shortcomings are recognised to remain; therefore, at the same time, the European Union and the
Government of Turkey launched a two-year twinning project titled ‘Efficiency in Anti-Money
Laundering and Counter Terrorist Financing’ to increase the efficiency and effectiveness of Turkey’s
AML/CTF system to better detect, prevent and reduce financial crimes, in line with EU legislation and
international best practices.
Money laundering remains a high concern in Turkey, and occurs in banks, non-bank financial
institutions and the underground economy. Turkish government officials estimate that between a
quarter and a third of Turkey’s economic activity derives from unregistered businesses. 31 Two of the
major methods of money laundering in Turkey are cross-border currency smuggling and bank
transfers in and out of Turkey.32
Financial activity of registered entities is monitored through the MANTAS AML system and suspicious
activities are reported to MASAK. This law was strengthened in 2006 by Laws 5237 and 5549, which
introduced penalties for money laundering offences, and enhanced customer due diligence (CDD)
and KYC obligations for financial institutions including money exchange bureaus. Terrorism finance
was later criminalised in 2013 under Law No. 6415, empowering MASAK to freeze assets suspected
of having links to terrorism.33 MASAK is now responsible for receiving, analysing and subsequently
disseminating suspicious transaction reports (STRs) to the relevant government agencies.34
To date MASAK has only received notifications of false currency declarations, but it should receive
notification of all declarations with the introduction of the amendments to Decree No. 32. This will
improve their intelligence analytical capacity and the quality of their investigations.
In terms of the movement of people, there have been increasing travel restrictions for Syrian refugees
coming into Turkey since early 2015. During the assessment, these limitations showed signs of
affecting the ability of NGOs to operate cross-border operations from Turkey, and of retail hawaladars
to maintain their regular physical cash courier movements.
Jordan

According to Jordanian legislation, individuals must declare cash they are bringing into the country if
the amount exceeds the value set by the National Committee of Anti-Money Laundering (currently at
JOD 15,000 (USD21,173).35 This regulation only applies to money transferred into the country, and
not cash that is leaving Jordan. One development agency confirmed that bringing money back into
Syria must be reported to the Jordanian Government and cleared at the border.
30
FATF (2014) ‘Fifteenth Follow-Up Report, Mutual Evaluation of Turkey’ (Oct), accessed at: http://www.fatf-
gafi.org/media/fatf/documents/reports/mer/Turkey-FUR-2014.pdf
31
US Department of State (2015) ‘INCSR – Money Laundering and Financial Crimes,’ Bureau of International Narcotics and
Law Enforcement Affairs, accessed at: http://www.state.gov/j/inl/rls/nrcrpt/2015/vol2/239109.htm
32
Ibid.
33
MASAK, ‘Frequently Asked Questions on Law No. 6415,’ accessed at: http://www.masak.gov.tr/en/content/frequently-asked-
questions-on-law-no-6415/2352
34
IFLR (2011) ‘Anti Money-Laundering Laws’ (4 May), accessed at: http://www.iflr.com/Article/2818304/Anti-money-laundering-
laws.html. This law was updated by Law No. 5549 on Prevention of Laundering Proceeds of Crime, adopted in 2006.
35
Jordan Anti-Money Laundering Law No. 46 (2007)


Jordan has a comparatively robust regulatory system for MSBs and exchange houses in the region, 36
with three major pieces of legislation to regulate their operations, and well-resourced monitoring
institutions.
The Money Exchange Business Law of 1992 stipulates that no person can carry out money exchange
business in the country without a licence issued by the Central Bank of Jordan. MSBs are required by
the Anti-Money Laundering Law No. 46 (2007) to maintain a register for outgoing and incoming
transfers, detailing the value and date of any transaction, as well as data on the client and their
beneficiaries. The laws specify no maximum amounts of money that can be transferred through
hawala operators, although they are subject to the AML/CTF regulations that relate to Money
Exchange Companies No. (2/2010) issued pursuant to the provisions of article 14 of Law No. 46.
The Central Bank of Jordan publishes a register of MSBs, which, as of 2013, included 140 individual
companies.37 At least six of these have strong connections to Syria via their owners. These include
Sahloul Exchange, al-Fuad Exchange, Musharbash Exchange, Saudi Exchange, Deiraneah, and
Shanawani. In interviews with ten operators in Jordan, they all revealed that their correspondent in
Syria is al-Haram Exchange. Musharbash Exchange, however, is the only registered Jordanian
company with a direct relationship to this correspondent. Therefore the funds deposited for transfer in
Jordan to Syria with all other MSBs route through Musharbash.
Enforcement
There are a number of informal MSBs and small-scale hawaladars that operate unregistered in
Jordan, and are able to transfer cash into Syria, and particularly to opposition-controlled areas. While
not registered, the Jordanian intelligence directorate is aware of the operation of these offices;
international organisations reported that there is a level of tolerance for these cross-border services,
so long as they are used in support of the aid effort, and engagement is made visible to the
authorities.
Lebanon

Lebanon has no legislation that details a declaration or disclosure style of cash courier control
system. Individuals are free to transport as much cash as they wish across Lebanon’s borders, and
there are currently no records being made of cross-border cash controls in Lebanon, other than those
by licensed financial institutions. A recent FATF report on Cash Couriers found that Lebanon’s
absence of laws controlling the cross-border transportation of cash made it unable to prosecute
known criminals who had placed USD1.6 million into the Lebanese banking system via multiple
accounts in 8 separate banks.38 The lack of framework for monitoring cross-border transportation of
currency thus poses a major challenge for law enforcement in detecting ML or TF.
Intermediate Decision 10726 does require banks and exchange institutions to submit monthly forms to
the Central Bank detailing the total value and number of cross-border cash transfers they have
performed, as well as any individual transaction exceeding USD10,000. 39 The reporting is, however,
low, indicating poor enforcement.
36
MENA-FATF (2009) ‘Jordan: Mutual Evaluation Report, Anti-Money Laundering and Combating the Financing of Terrorism,’
accessed at: http://www.menafatf.org/images/UploadFiles/MER_Hashemite_Kingdom_of_Jordan.pdf
37
Central Bank of Jordan (2013) ‘Directory of Money Changers,’ accessed at:
http://www.cbj.gov.jo/uploads/exch_corp_Eng19-2-2013.pdf.pdf
38
FATF (2015) ‘Money laundering through the physical transportation of cash,’ Risk, Trends and Methods Group
FATF/RTMG(2015)9 (23 Jun)
39
Banque du Liban (2011) ‘Immediate Circular No. 263,’ accessed at: http://www.bdl.gov.lb/circulars/download/397/en


Law 318 (Apr 2001) is Lebanon’s most salient piece of AML/CFT legislation. It states that exchange
institutions must ascertain the true identity of their clients and maintain documentation for a minimum
of five years after completion of an operation.40 This was supplemented by Law 347 (Aug 2001)
which established an official registration system for exchange institutions, prohibiting any institution
without a license from the Central Bank from undertaking exchange operations.41 This has been
strengthened by a number of laws, most notably Circular No. 126 (Apr 2012), which details strict due
diligence procedures for cross border operations. 42
Basic Decision No. 9708 (Sep 2007), stipulates that exchange institutions are the only financial
organisations permitted to carry out hawala transactions. Hawala transfers are prohibited from
exceeding the equivalent of USD20,000 and Exchange Companies are required to maintain records
of all hawala transactions, dating back five years. These records must detail name, passport or
identification number, and nationality of the beneficiary and the transfer ordering party, as well as the
sum being transferred and the source and destination country.43 Intermediate Decision No. 11544
(2013) placed further regulations on exchange institutions conducting hawala transactions by
requiring them to establish autonomous compliance departments and implement stringent risk
management procedures.44
Enforcement
On the whole, in spite of the strong regulation in place for exchange houses, enforcement in Lebanon
remains difficult due to the risk profile of the country. Exchange houses reportedly continue to be
used to facilitate ML and TF, including by Hezbollah, and global linkages with the formal banking
system are facilitated by the widespread Lebanese diaspora community, which stretches across
Europe, North America, Asia and West Africa. The most difficult aspect to control is the trade-based
money laundering.
By way of example, the aforementioned exchange houses designated by the US Treasury

Department managed to launder hundreds of millions of dollars of drug proceeds from the trafficking
network of Ayman Joumaa, who has loose connections with Hezbollah. They used schemes
involving used car dealerships in the US and consumer goods from Asia, which obfuscated the
source of illicit funds by comingling or splitting transactions across a variety of these businesses,
financial institutions, and continents. One critical component of the operation involved the placement
of bulk cash into MSBs located in Beirut, which had accounts with the Lebanese Canadian Bank. 45 It
is exceedingly difficult for regulators and law enforcement to distinguish between legitimate and illicit
finance in such complex international trade.
Lebanon has clearly been an important location for the placement of funds for Syrian businesses pre-
war, and capital flight since the onset of the conflict. A senior economist at the UN Economic and
Social Commission for Western Asia (ESCWA) claims that the bulk of the money transferred out of
40
MENA-FATF (2008), ‘Mutual Evaluation Report: Anti-Money Laundering and Combating the Financing of Terrorism-
Lebanese Republic’ (10 Nov), accessed at: http://www.menafatf.org/MER/MutualEvaluationReportoftheLebaneseRepublic-
English.pdf
41
Banque du Liban (2001) ‘Regulating the Money Changer Profession in Lebanon,’ accessed at:
http://www.bdl.gov.lb/laws/download/49/en
42
Banque du Liban (2012) ‘Basic Circular 126- Addressed to Banks and Financial Institutions’, accessed at:
http://www.bdl.gov.lb/circulars/download/429/en
43
Banque du Liban (2007) ‘Basic Decision No 9708- Cash Transfers According to the Hawala System’, accessed at:
http://www.bdl.gov.lb/circulars/download/117/en
Banque du Liban (2013) ‘Intermediate Decision No 11544- Amending Basic Decision No 9708 of September 24,2007 on
44
Cash Transfers According to the Hawala System’, accessed at: http://www.bdl.gov.lb/circulars/download/485/en

45
US Department of the Treasury (2013) ‘Treasury Identifies Kassem Rmeiti & Co. for Exchange and Halawi Exchange Co. as
Financial Institutions of Primary Money Laundering Concern’ (23 Apr), accessed at: http://www.treasury.gov/press-
center/press-releases/Pages/jl1908.aspx

Syria – mainly to Lebanon – was moved in the early stages, and even before: “Some financiers in
Aleppo even transferred money with the start of the uprising in Tunisia.” 46 Central Bank data shows
that between March and December 2011 non-resident private sector deposits at commercial banks in
Lebanon climbed from USD18.3 billion to USD21.3 billion; the USD3 billion increase was almost twice
as fast as the rise of USD1.6 billion over the previous nine months. 47 A recent estimate put the total
deposits that have moved to Lebanese banks from Syria at USD11 billion, and showed indications
that another billion dollars was injected in the Lebanese economy through Syrian consumer
spending.48
At a personal level, interviews indicated that it has become increasingly difficult for Syrians in
Lebanon to open a bank account in Lebanese Lira or USD, and transferring and depositing money in
existing accounts is also under increased scrutiny. While there are fewer cash controls in Lebanon,
the interviews also revealed that there are sensitivities for some companies around cash transfer to
Syria. They reported feeling at risk of being targeted and potentially shut down by Lebanese groups
allied with the Syrian government (particularly Hezbollah). Given Hezbollah’s strong control of the
government and intelligence services, cash transfers to Syria from Lebanon could be under increased
pressure and put Syrians at risk, particularly if they are Sunni. Interviews with Syrians who send and
receive money from Lebanon revealed that they prefer to travel to Chtaura (along the Beirut-
Damascus road) than use exchange offices in Beirut due to fears of harassment and Hezbollah
intimidation.
Additionally, MSBs in the predominantly Sunni Lebanese border town of Arsal have experienced
difficulties in operating due to the controlling influence of Islamist groups in the area. A reverse trend
is experienced by senders in Dubai transferring money into Syria with names more commonly
associated with Shiites; we were told of several cases where legitimate business people had been
arrested due to suspicions about funds diverting to Hezbollah.
Iraq49

Iraq possesses declaration style cash courier controls, with a threshold of IQD 15,000,000
(USD12,600). Any person carrying this amount of cash into or out of Iraq is obliged to detail the
origin, destination, and route of the currency and/or monetary instruments, and the amount and type
of monetary instruments to customs authorities. 50 Like elsewhere in the region, USD are widely
accepted and used for payments inside Iraq.

Iraq’s AML/CTF regulatory framework is reasonably well-established. The AML law was introduced in
2004 (CPA Order No. 93) and an anti-terrorism law in 2005 (Law No. 13). The former classifies
banks, insurance institutions, securities traders, money transmitters (formal and informal), persons
who undertake hawala transactions, and foreign currency exchange houses as ‘financial institutions’51
– thus, they are all subject to the country’s AML and CTF legislation.
46
Hassan Chakrani (2013) ‘The Economic Menace of the Syrian Conflict,’ Al-Akhbar Management (8 July)
47
Dominic Evans (2012) ‘Sanctions Weigh on Lebanon-Syria Banking Ties,’ Reuters (8 February)
48
An ESCWA study cited in Hassan Chakrani (2013) ‘The Economic Menace of the Syrian Conflict,’ Al-Akhbar Management (8
July), accessed at: http://english.al-akhbar.com/node/16361
49
For a short analysis of the four governorates that make up the Kurdish areas of Iraq, refer to Beechwood International (2015)
‘Kurdistan Region of Iraq Case Study,’ available on request.
50
MENA-FATF (2012) ‘Mutual Evaluation Report: Anti-Money Laundering and Combating the Financing of Terrorism in Iraq’
(28 Nov), accessed at: http://www.menafatf.org/images/UploadFiles/Final_Iraq_MER_En_31_12.pdf
51
MENA-FATF, ‘Mutual Evaluation Report: Iraq,’ pp.71-2

The AML law states that all money transmitters must retain records of transactions above IQD
500,000, including dates, amounts, and information on the beneficiary and client. Money laundering
is, however, only a misdemeanour under CPA Law 93; hence the Government does not prosecute
cases under this law. New AML/CTF legislation is under review by Iraq’s Shura Council, Council of
Ministers and some members of the Iraqi Parliament.
Enforcement
According to the World Bank, the above laws are extensive in scope compared to other countries in
the region, but implementation is limited.52 A MENA-FATF evaluation in 2012, highlighting the
complete absence of convictions and only a handful of prosecutions, also recognised that
implementation needs to be strengthened.53 Despite relatively strong regulations, ambiguity in the
KYC requirements and lack of supervision have hindered compliance in practice.
For example, MSBs are not required by law to detail the beneficial owner of any account, or designate
clients as having a higher ML risk, such as PEPs. 54 The exposure of the charities sector to money
laundering and terrorist finance has also not received much attention, despite the over 670 NGOs
registered in Iraq (as of 2012) – while they are regulated by Law No. 12 of 2010, and supervised by
the NGO Department within the Council of Ministers, NGOs are not subject to AML/CTF regulation,
and Iraq has not conducted a risk assessment, or raised awareness, of the potential abuse of the
sector by those wishing to hide financial crimes.55 Instead, there are reports of the Central Bank
limiting the supply of currency in branches on which charities are reliant for liquidity, thereby forcing
them to revert to the informal currency markets.
In 2012, USD271 million in personal remittances flowed into Iraq; the third largest amount recorded in
the Middle East after Turkey and Lebanon. 56 This money is also extremely difficult to distinguish from
the trade-based money laundering occurring through the country. The general flooding of USD into
the region via NATO countries, primarily to pay contractors who were supporting the war and
reconstruction effort, made it easier for insurgency flows to blend into the movement of legitimately-
sourced funds.
In October 2013, Iraq made a high-level political commitment to work with the FATF on an action plan
to address its strategic AML deficiencies, including the political independence of its FIU. Greater
clarity of legislative provisions and a delineation of roles of the relevant ministries and agencies is
required if enforcement is to be made more effective. In response to the specific ML/TF concerns, an
IMF report found that the Iraqi authorities have been limiting foreign exchange supply 57 – there are
signs, however, that the new controls have actually contributed to the increase in the spread between
the official auction and parallel market rate, also encouraging more black market trade.
The US State Department categorised Iraq as a ‘Jurisdiction of Primary Concern’ in the 2014
International Narcotics Control Strategy (INCSR) report. Licensed and unlicensed hawala networks
continue to be used extensively for both illicit and legitimate money transfer.
52
World Bank (n.d) ‘Republic of Iraq: Financial Sector Review’, p.11, accessed at:
http://siteresources.worldbank.org/INTMENA/Resources/Financial_Sector_Review_English.pdf
53
MENA-FATF, ‘Mutual Evaluation Report: Iraq’.
54
Politically Exposed Persons – a class of accountholder that is deemed by the authorities to be of higher risk for banks.
55
MENA-FATF, ‘Mutual Evaluation Report: Iraq’.
56
IFAD (2015) ‘Sending Money Home: Worldwide remittance flows to developing and transition countries,’ p.16
57
International Monetary Fund (2013) ‘Iraq: 2013 Article IV Consultation,’ IMF Country Report No. 13/217 (Jul), p.17

Domestic
In Syria, prior to the introduction in 2006 of Law No. 24 regulating private companies, institutions and
offices for money exchange and transfers, most of the money transfer activities were practiced via
unlicensed service providers (individuals and institutions), and therefore were not subject to any
regulations.
One MENA-FATF evaluation team observed that money dealers had become very well practiced in
using methods to hide their activity in situations when banking and financial services were not readily
available. They did this by conducting different activities such as the transport of goods, and layering
money transfers through hawala techniques.58
Certain allowances were also made for businesses that were known to facilitate ‘off the books’
transactions, which included some small dealers, whose trade was not significant enough to warrant a
threat to their control, but provided a source of bribes to corrupt officials.
There is no reliable information on the size of the informal sector in Syria – either prior to the uprisings
or during the crisis, which includes the money dealers’ activity. Nevertheless, anecdotal reports
indicate that it is significant. For example, in 2006, one money broker’s yearly turnover reportedly
amounted to EUR1.8 billion,59 while in 2008, a hawala industry ‘insider’ is recorded in a confidential
US diplomatic cable as boasting that his network could “move USD10 million anywhere in the world in
24 hours”.60 Five years later, the US Government indicated that the daily volume of black market
business of money changers ranged from USD15-70 million.61
Despite what appears to be a freely operating black market economy, interviews with traders and
money dealers revealed that the money transfer system was much more controlled than the
equivalent in neighbouring countries prior to the uprisings. Businesses were monitored with a
particular focus on restricting cash leaving Syria.
Through one-on-one interviews and a review of Central Bank data in Syria and Qatar, we compiled
Tables 1 and 2 to capture the companies who retain registration, are under investigation, or have had
their licences revoked. It appears that there were less than 20 registered money transfer businesses
operating in Syria before the crisis, and now only 4-5 registered companies formally operating in
Syria. This does not include the hundreds of unregistered agents of various sizes who either continue
to operate or have established operations in response to the opportunities presented by the war.
Over the course of the conflict, the government has closed down several of the largest registered
companies. The Syrian Central Bank and Anti-Money Laundering and Anti-Terrorism Financing
Commission claims that the companies were closed down on charges of money laundering, currency
speculation, or financing terrorist activities, while several of the companies claim they were closed for
actively opposing the government by not capitulating to their demands. The formal closures ensure
that the Central Bank has a monopoly of influence over registered MSBs.
58
MENA-FATF (2006) ‘Syrian Arab Republic: Mutual Evaluation Report, Anti-Money Laundering and Combating the Financing
of Terrorism,’ accessed at: http://www.menafatf.org/images/UploadFiles/MutualEvaluationReportofSyria.pdf
59
European Investment Bank (2006) ‘Feasibility Study to develop new options for private sector investment financing in the
Syrian Arab Republic, Phase 1: TA 2005/S 44-041720 (SY/2005/01),’ Final report, Oct 2005-Mar 2006, p. 38
60
US Secret Cable (2008) 08DAMASCUS54, released through WikiLeaks.
61
US Department of State (2013) ‘INCSR 2013 Money Laundering and Financial Crimes Country Database: Volume II,’ Bureau
of International Narcotics and Law Enforcement Affairs (July), p.380

Table 1: Licensed money transfer businesses operating in Syria 62
No. Name License Permission to Start Branches Comments

Business (numbers where
available)
No. Date No. Date
1 Al Adham Exchange 415/4‫ب‬/‫م ن‬ 11/08/08 220/‫أ‬.‫ل‬ 22/02/09 Damascus Founder is from Hama.
Company The company’s website lists branches in Homs and Aleppo, but it is unclear
‫شركة األدهم للصرافة‬ whether those branches continue to be active.
2 Express Tours 48551 1991 Aleppo Operates a money transfer and exchange service alongside tours and
‫اكسبرس تورز‬ (company courier services (http://www.expresstours-sy.com). Facebook page was last
registered) active in August 2014 (https://www.facebook.com/expresstours.sy). Several
people referred to the ability of Express Tours to transfer money into Syria,
but no further information was available.
3 Al Fuad Exchange 277/4‫ب‬/‫م ن‬ 25/04/07 881/‫أ‬.‫ل‬ 13/08/07 Operated 15 Founder is from Busra Al Harir, Dara’a.
‫شركة الفؤاد للصرافة‬ branches pre-war. Uses al-Haram to access areas of Syria outside its branch network.
Temporarily closed down by authorities in October 2013, accused of
manipulating foreign currencies and trading using fake names and
identification. They continue to be under investigation. Their website only lists
branches in the U.A.E.: http://alfuadexchange.com/, but they have an active
Facebook page available at: https://www.facebook.com/pages/Al-Fuad-
Exchange-‫ال فؤاد‬-‫ل ل صراف ة‬-‫وت حوي ل‬-‫االم وال‬/1843718989185726?fref=ts.
4 Dyar Electronic Services 276/4‫ب‬/‫م ن‬ 25/04/07 728/‫أ‬.‫ل‬ 10/07/07 Damascus, As- Co-owned by Mazen Al Tabbaa and Rami Makhlouf in the inner circle of
for Exchange Co. Sweida, Latakia the government. Makhlouf also runs the Western Union affiliates that
(operates the Western operate in GoS-controlled areas in Syria. Western Union currently has
Union offices in Syria) the largest volume of transfer of small cash amounts into regime-
controlled areas, with long queues often seen at the offices.
‫شركة الديار للصرافة‬
5 Al Haram Exchange 283/4‫ب‬/‫م ن‬ 16/05/07 1277/‫أ‬.‫ل‬ 15/11/07 Operated 70 Publicly supportive of the GoS in their online advertising; allegedly
Company (The Pyramid branches pre-war. provide the central bank with dollar reserve. In Jordan, Musharbash
Exchange Company) Exchange is the only Jordanian company with a direct relationship with
al-Haram, with all exchanges from Jordan going through Musharbash
‫شركة الهرم للصرافة‬
and transferred via al-Haram into Syria.
6 Sham Exchange Damascus Looks active on Facebook (https://www.facebook.com/chamdam123);
‫شركة شام للصرافة‬ last activity logged 10 June 2015. Appears to be based in Damascus,
however we were told they also work in Idleb with Zain.
62
This table was drawn from a combination of interviews and the record from Qatar Central Bank (2013), ‘List of Exchange Houses Operating in Syria, Including Branches’, (September)
http://www.qcb.gov.qa/English/Legislation/Instructions/Documents/BankInstructions/2013/13-139.pdf

Table 2: Money transfer businesses in Syria with cancelled or unclear licensing status due to outstanding investigations since 2011
No. Name License Cancelled/ Branches Comments

investigation 63
No. Date Date
1 Al Amana Exchange 282/4‫ب‬/‫م ن‬ 16/05/07 Damascus, Aleppo, The company’s main branch is in Aleppo, however its Facebook page:
Homs https://www.facebook.com/AMANAEX indicates no online activity since
‫شركة االمانة للصرافة‬
2013, and its website is down.
2 Biko Exchange Aleppo The Anti-money Laundering and Anti-terrorism Financing Commission of
Syria filed an investigation against them in July 2014 on charges of “money
‫شركة بيكوللصرافة‬ laundering and financing terrorism”. The company’s website
(www.bekoco.com) is down, and its Facebook page
(https://www.facebook.com/Beko.Exchange) has not been updated since
November 2013.
3 Hanifa/Hanifeh Exchange 275/4‫ب‬/‫م ن‬ 25/04/07 10/03/13 Damascus, Aleppo, Closed down by authorities in October 2013 for “illegal international transfers
Homs, Latakia outside of central bank regulations”, and breaking Law No. 24 regulating
‫شركة حنيفة للصرافة‬
private companies, institutions and offices for money exchange and transfers.
Owner of company currently based in Turkey and is able to deliver in non-
government controlled areas.
4 Khalaf Exchange 27/09/14 Damascus Registered as a shipping, customs clearance and remittances company.
Closed down by authorities in September 2014 due to illegal transfers and
‫شركة خلف للصرافة‬ exchanging currencies on the black market, as well as smuggling foreign
currencies into neighbouring countries.
5 National Exchange 311/4‫ب‬/‫م ن‬ 21/08/07 403/4‫ب‬/‫ن‬ 23/07/08 Damascus
Company
‫الشركة الوطنية للصرافة‬
6 Sultan Exchange 367/4‫ب‬/‫م ن‬ 21/02/08 Damascus, Aleppo,
Company Homs, Hama
‫شركة سلطانة للصرافة‬
7 Sahloul and Kamar 278/4‫ب‬/‫م ن‬ 25/04/07 02/10/13 Operated 35 One of the founders, Zhouheir Yassar Sahloul, is renowned as being the most
Trading Services Ltd/ branches pre-war. influential money trader in Syria. In 2005, Sahloul was assigned a formal role
in the Central Bank and helped to stabilise the Syrian pound during a crash;
Global Sahloul Group for within weeks the Syrian Pound appreciated by 20 percent. He fled the country
Exchange in 2012.
‫مجموعة سحلول الدولية‬
63
From mid-2013, the Syrian Ministry of Interior has publicly withdrawn the licences or closed money transfer and exchange companies it accuses of unlawful black market activities. This table includes the
information we could verify; however, we also received reports that the following companies have either experienced a 1-6 month suspension or closure: al-Jaza’iri and Partners Exchange; Sa’ii Exchange (‫) ساعي‬
in Latakia; al-Haja Exchange; al-Wazan Exchange, in Latakia; Jarmakani Exchange; and al-Ra’ed Exchange.

For those who have been shut down by the government, they are still able to operate using their
agent networks, but do so discretely. Several wholesale money transfer companies continue to
dominate the commercial money flows, but those who were not in support of the Syrian government
have had their licences revoked and are thus not technically allowed to work in government-controlled
areas. These companies claim to have good reach in most of the opposition areas, and were realistic
when asked about precise locations, showing daily updates from agents in the country regarding
liquidity and security conditions.
For companies who profit from their operations in government-controlled areas, there was widespread
agreement among those interviewed that there is less incentive to jeopardise this business by working
in opposition areas, even if they do so without a paper trail.
Within government-held areas of Syria, humanitarian agencies are using al-Haram Exchange or al-
Haram Transfer, with whom they hold a corporate account. On one of its official websites, the
company claims that it was founded eighty years ago as a cargo company for the shipping and land
transportation of goods to all of cities across Syria, and that in 2000, the decision was made to enter
the Syrian money transfer market.64 On another of its websites, it claims that the money transfer
business began 25 years ago.
Before the crisis, al-Haram had grown to have the largest number of branches in Syria – 75, which is
double the amount of the next largest widest network, run by Sahloul and Kamar Trading Services
Ltd. Several people inside Syria suggested that al-Haram served the domestic needs of ordinary
people, while Sahloul and Kamar also catered for the international business market. Members of the
UK diaspora claimed, however, that the latter also serves their basic needs for sending money to
relatives at home.
There are many new players in the market, but predominantly small-scale dealers servicing local
trade and remittances from Syrians outside the country. They often lack structure, systems,
bookkeeping and money exchange backgrounds, therefore would present high risk with larger
transaction sizes. This assessment focuses on examining the capacity and processes of the IVTS
that are classified as either wholesale or corporate.
Now that we have a clearer sense of the purpose, mechanics and regulation of IVTS affecting cross-
border money flows into Syria, the next chapter explores how humanitarian money is currently flowing
to opposition areas. This will help the next step in evaluating the capacity of current IVTS to
accommodate more potential volume.
64
Two websites: http://www.haramexchange.com/ and http://haram-transfer.com/. A representative of Al-Haram explained to
NRC that al-Haram Transfer connects the Syrian entity with the branch network – Exchange – with overseas entities, so they
are distinct legal entities. Dean, ‘Remittance Modalities in Syria,’ NRC.
© BEECHWOOD INTERNATIONAL 20
2. HUMANITARIAN FLOWS TO SYRIA: CAPACITY OF IVTS
In order to gauge the capacity of existing IVTS to accommodate more potential volume, it is important
to understand better where they operate, how they source their liquidity, what a typical humanitarian
transaction looks like, and the present scale and type of expenditure.
2.1 LOCATION
Interviews with several of the wholesale hawala companies revealed a very dynamic picture of what
destinations were possible at any one time – these variations depend entirely on the local updates
sent to them by their agents on a daily basis, advising on where it is possible to transfer money and
the upper limits to specified areas. They admitted that delays can occur, primarily due to security
reasons or if communication networks are down, but these are reported instantly to the client.
One-on-one interviews with INGOs revealed that they use the following bases outside Syria for inward
transfers to corresponding parts of the country: Turkey for north and west; Iraq for north east;
Lebanon for central; and Jordan for south and central. Humanitarians appeared most confident about
their ability to transfer funds from Iraq into Al-Hasakah, while the systems for facilitating bulk
payments from Jordan to Dara’a and Lebanon to besieged areas were perceived to be most
problematic.
CBR-TWG members indicated that NGOs from Turkey are using transfer agents in Kilis, Reyhanli,
Gaziantep, and Antakya to transfer cash to Aleppo (urban and rural), Idleb (rural – Sarmada),
Hazano, Marea, Azaz, Aktarin, Suran and Haritan. Agents also reported to them that they were able
to transfer money to Al-Mayadin, Ras Al-Ain, Al-Bab, Menbej, and Ar-Raqqa. Other locations were
noted as inaccessible at the time.
All 17 money transfer agents present in the receiving areas of northern Syria held by JAF appeared to
be small, retail hawaladars, and operated through mobile phone shops with links to Turkish
counterparts. No larger dealers seemed to exist in Idleb city, which JAF captured in late March 2015.
The reach of the networks reportedly covers Idleb urban 100% and rural 80%; Aleppo urban 40%,
and rural 70%; Jisr al-Shughur; and Saraqib. A survey respondent who has been conducting CTP in
this area identified transfers between Idleb and Sarmada as posing a problem, but no further
information was provided.
No reporting was received from Iraq through the online survey; however, local NGOs who have been
consistently working in the Al-Qa’im refugee camp on the Syrian border reported that they use a
trade-based hawala system to settle accounts. They deposit with banks in Baghdad and have
arrangements with local traders who help with the cash flow.
In regards to reaching besieged areas such as Ghouta and north Homs, two respondents in our
online survey reported serious obstacles to access.65 This reflects all of the anecdotal reporting we
also received through interviews with aid workers. One respondent, however, made this comment in
the survey: “We have been working in Damascus Governorate and Rural Damascus for more than 3
years. We have not faced any problems in the delivery of cash to beneficiaries inside Syria
previously”, which provides a different picture.
Only one organisation reported to be sending money actively from Jordan (USD53,000 without any
losses since December 2014).
In terms of capacity, one NGO worker notes that most individual hawaladars where aid agencies
operate inside Syria and neighbouring countries process between 200-400 customers per day. His
view is that it is unrealistic to expect agents of this size to process the numbers that would be required
in a CTP, which is reaching more like 5,000 people daily. 66 This may well be the case, which is why if
cash support were to be disbursed to people, a local committee should be approached to help
coordinate the pay-out. This appears to be possible, especially in a governorate like Idleb which has
21% of Syria’s local councils (numbered at 185 during the research).
The question is more about liquidity, however, because whether the dealers are transferring cash for
staff salaries, supplies, vendors, or beneficiaries, one of the main challenges is how to ensure
adequate cash pools for on time delivery, while limiting the amount of cash held on site at any one
time.
2.2 LIQUIDITY
CBR-TWG members reported that transfer capacities of their agents varied from USD90,000-800,000
over a 48-hour period. All respondents felt that their agent would be able to work with other
organisations and increase their transfer capacity if necessary. The higher end of this threshold
appears concerning when we compare with what the hawala companies and local NGO staff informed
us from inside Syria.
In our interviews with hawaladars in JAF-held areas, nine stated that they would “prefer it” if a single
customer does not receive more than the equivalent of USD20,000 per day as they do not hold on
site more than USD50,000-60,000 at any given time. The remainder – eight – stated that there is
theoretically no limit, but if the amounts exceeded USD40,000 or 50,000 per day, then they will have
A ‘besieged’ population has been intentionally denied basic necessities such as food, water and medicine and freedom of
65
movement by parties to the conflict.

66
Alan Grundy (2014) ‘While we look for cash response options in Syria, let’s not forget what is working – vouchers!’
International Rescue Committee (19 Nov)
problems procuring that much cash. For those amounts, they would need 5-10 days of advance
warning so they can secure the necessary cash – and the pay-out is only possible in local currency.
In an interview with one of the three largest money transfer and exchange companies by volume
before the war, we were told that they would keep USD1 million on site in each of the two largest
cities – Aleppo and Damascus. But in their other branches, they would only ever keep USD100,000
on site. This correlated with the money flows generated by inbound remittance from Syrians outside
the country, and domestic traders.
The CBR-TWG member estimates of the threshold indicate that the higher amounts would require a
significant amount of physical cash courier, and possibly the use of cash derived from illegitimate
sources, but this will of course depend on the destination. A lack of understanding regarding the
source of this liquidity on behalf of NGOs could implicate them in suspicious economic activity.
Some aid organisations have chosen to establish and maintain a revolving cash fund denominated in
Syrian Pounds (SYP) for field staff to use for local expenditure. Under such a fund, a fixed cash
balance is established, and so as money is spent, the cash is replenished up to the level of the fixed
balance. In one organisation, advances of up to USD20,000 are held by the local finance officers who
are employed to deliver a particular programme and are located in the community. This has given
them the flexibility to make small payments on an as-needs basis. Most communities only require
advances of USD5,000, but larger pools are maintained in Aleppo due to the size of the programme in
the north, and in the besieged areas due to the delays and risks attached to delivering money there.
Hawaladars are used regularly to replenish the supplies.
When engaging suppliers, this same organisation transfers funds into the custody of the hawaladar in
their office outside Syria as a guarantee of on-time payment, and requests that the money is kept ‘on-
hold’ until the service or goods are delivered. Once the checks are completed, the organisation
advises the hawaladar to release the funds to the supplier. The preference is for the hawaladar to
use the supplier’s bank account, rather than cash, which appears easier in the north (via Turkey),
than the South (via Jordan or Lebanon). The organisation must appreciate that his agent will make
use of that money during the time it is ‘on-hold’. Ideally, it would be safeguarded in a bank instead.
Another organisation keeps a USD200,000 deposit with its hawaladar. It is unclear whether this is the
dealer’s requirement or a need identified by the agency based on its expense forecasting. This is a
substantial deposit that again would be used actively by the hawaladar to settle other debts.
2.3 A TYPICAL TRANSACTION
The majority of funds from Western donors are remitted to Turkey before entering Syria. When the
funds are received by an INGO, they reach Turkey, Jordan, Lebanon and Iraq by bank transfer, either
to their office in those countries, or directly into the account of their implementing partner.
Alternatively, the partner nominates the account of another registered organisation, or requests that
the money is withdrawn and handed to them in cash for onward distribution. The partner is a Syrian
entity, registered as a Turkish association under Law No. 5253, and sometimes also abroad, for
example in the UK. This entity then engages an IVTS – usually a retail hawaladar. It is at this point
that the formal banking relationship ends, and the informal chain is activated.
Very few humanitarian staff we interviewed were aware of how the cross-border transaction actually
takes place. Several staff in operations and finance did have prior knowledge due to working in the
money exchange business before the war. They provided exceptionally useful insights, which we
triangulated with existing knowledge of how the system works, and what the business community was
able to share about how it has evolved.
Box 4 is an attempt to summarise the type of steps involved in the two main flows that facilitate the
transaction: information and money. The Lebanon example is accompanied by an infographic
overleaf to help readers follow the steps. Both are necessarily a simplification of the actual
relationships that can underpin one transaction.
BOX 4: CROSS-BORDER TRANSACTIONS
TURKEY INTO OPPOSITION-HELD SYRIA LEBANON INTO BESIEGED AREA OF SYRIA
Purpose of transaction Purpose of transaction

INGO in Gaziantep (A1) wants to send $50,000 to a INGO in Beirut (A1) wants to send $50,000 to a local
local partner (A2) in northern Syria to pay partner (A2) in eastern Ghouta to provide cash
contractors and salaries for local staff. income support to beneficiaries.
Agreed terms of payment Agreed terms of payment

A1 commits to paying a local agent/broker (B1) the A1 commits to paying a local agent/broker (B1) the
full amount plus 0.2% commission on receipt of the full amount plus 6% commission on receipt of the
money in Syria. money in Syria.
Money flow Money flow

1: B1’s correspondent in Aleppo (B2) transfers funds 1: Import/export trader (T) delivers $50,000 to A2
in cash to A2 upon receipt of the code. B1 now owes upon receipt of an authentication code, settling his
B2 $50,000. previous liability to B2. A2 organises the onward cash
2: A1 deposits cash or conducts a bank wire transfer distribution to beneficiaries.
(e.g. to a UAE account) to B1 upon confirmation that 2: NGO in Beirut deposits the cash with B1 upon
funds have been received. confirmation that the funds have been received.
3: An import/export trader (T) in Aleppo pays B2 Information flow
$50,000 plus commission to make a transfer to his 1: B1 gives A1 authentication code to pass onto A2.
supplier (S) in Dubai. 2: B1 asks correspondent in Rif Damascus (B2) to
4: B1 pays S, settling his liability to B2. pay A2 $50,000.
3: B2 contacts T in Damascus city who owes him
Information flow $50,000 plus commission for a previous transaction.
1: B1 gives A1 authentication code to pass onto A2. T confirms he can arrange physical transportation of
2: B1 asks B2 to pay person A2 $50,000. Transaction cash into the besieged area, timed to coincide with
is instant. another known shipment coming into the area.
3: B2 asks B1 in Gaziantep to pay person S in Dubai 4: B2 warns A1 that the transaction may take up to 10
$50,000. days.
5: A2 confirms to B1 receipt of the funds by sending
the code via phone.
Information flows are enabled by a plethora of mobile phones per operator, using voice and mobile-
messaging platforms such as WhatsApp and Kik. WhatsApp incorporates a GPS mapping tool that
enables people to communicate their exact locations, while Kik allows people to register a username
without providing a phone number that could identify them, and has confirmed publicly that it does not
‘see, store or monitor the content of conversations between users’. 67 There is no doubt that mobile
phone technology is critical to the timely movement of funds in Syria and other crisis-affected
contexts.
An immediate glance at the money flows for the single transaction from Lebanon shows a curious link
between the aid agency and trader. This is used to illustrate the complex relationships that underpin
such a transaction.
67
Newsweek Feature (2015) ‘How does ISIS fund its reign of terror?’ (14 Nov)
2.4 SCALE AND TYPE OF EXPENDITURE
The actual and forecast data that was collected in our online survey was intended to help establish
the capacity of the systems to take on further demand – especially as more organisations explore the
possibility of conducting programmes in Syria that involve direct cash for beneficiaries. Thirteen
humanitarian agencies showed that for 2014 around USD16 million was transferred in cash cross-
border, and the forecast for 2015 is around USD24 million. To put this in perspective, ten of USAID’s
implementing partners in Afghanistan used hawaladars to transfer USD13.5 million in cash payments
in 2010, representing 7% of the USD181.1 million in total costs they incurred in the country that year.
The USAID Inspector General found that with the right internal controls and due diligence on
providers, this was a perfectly sound volume for the system to manage. 68
68
US Agency for International Development (USAID) Office of Inspector General, Afghanistan, ‘Review of Cash Disbursement
Practices of Selected USAID/Afghanistan Implementing Partners’ (Report No. F-306-11-00X-S), 7 March 2011
Somewhat surprisingly, only a minimal proportion of forecast funds transfers relate to ‘cash for
beneficiaries’; but there is some growth in absolute terms. Contractors and their supplies make up
the majority of transactions, and there appears to be a plateauing of this expenditure and staff
salaries, at a ratio of around 2:1, in the latter part of 2015.
To cross-check the amount of Western donor money entering Syria, one government contractor,
which is registered as a company rather than charity in one of the neighbouring countries, kindly
agreed to submit a survey response. This provides a useful indicator of scale coming from other aid
flows. Similar practices were used by the contractors in terms of hawaladar selection, but they
differed in view of the question of liquidity.
Overall, the scale reported here remains small in comparison to what the market can manage. The
recommendations in the report will reflect this – they would be very different with more volume.
2.5 CONCLUSION
The actual and forecast volume of cross-border cash flows into Syria on behalf of humanitarian
agencies appears to be at a level that will not have an inadvertently negative impact on the existing
system. Experience from other contexts also shows that hawala has been used successfully at
comparative levels without a problem, so long as the right controls are in place. The challenge
remains as to how best to protect humanitarian money from being derived too closely from illicit
sources, or diverted to them in the form of direct payments. Da’esh generates a huge amount of
income from the sale of various commodities it controls or taxes, and services that are recycling
through the system. Aid agencies must understand the financial network and its affiliation to any of
this trade so that they can evaluate their appropriate risk threshold.
3. IVTS INSIDE SYRIA: PROCESS AND SYSTEMS
This section aims to help aid workers better engage the available financial service providers on
fundamental areas of a money transfer: cost; disbursement method; and accountability. Cost can be
divided into the impact of currency fluctuations and varied commissions, while disbursement methods
will vary depending on the security situation on the ground and the ease of access to areas in the
country. The terms of a draft contract are proposed in the accompanying Annex 2 to address key
questions surrounding accountability.
3.1 CURRENCY
Despite obvious variation across the country, a common finding across many NGO needs
assessments is that markets have the capacity to respond to a cash injection. 69 One assessment
covering northern Syria noted that: ‘Overwhelmingly, the most significant challenge reported by
vendors was inconsistent demand creating an inability to forecast restocking and supply’. 70
Therefore, there are fewer concerns about distorting the market, and more caution around how to
manage the risk of vendors taking advantage of the currency situation.
There is no doubt that in recent years Syria’s war economy has become increasingly dollarised, as
residents in pro-government areas desire the US currency, while the use of the SYP has decreased in
rebel-held zones in the north. Reports from Sarmada, which serves the Idleb and Aleppo markets as
a transit point from Turkey, suggest that the USD is the primary currency in operation among the
bureaus there.
Strict restrictions have long been imposed by the foreign exchange office on the purchase and selling
of foreign currencies with respect to the public, which has encouraged people to resort to informal
money exchange dealers. Through the use of bullying and intimidation tactics, the now sanctioned
CBoS ensures it still has control over USD reserves in Syria, thus the supply and prices. In 2013, for
example, the government threatened Syrian traders who price goods in foreign currency with up to
ten years in jail, and the CBoS also bought hundreds of millions of dollars from the domestic currency
market it now tightly controls, helping to build up depleted reserves for an economy crippled by civil
war.
The SYP remains volatile, despite government

attempts to stabilise it. In April 2015, the SYP
abruptly weakened after rebels captured strategic
northern cities in Idleb province. Moreover, the
number of currency exchange dealers has
predictably increased with the gains to be made in
speculations over the devaluation of the national
currency.
During the conflict, the CBoS has continued to

quote daily rates for the SYP against other
currencies. These rates comprise the official
central bank rate, a rate applicable for the
Commercial Bank of Syria (the largest state-
owned bank), a rate at which other banks can
obtain foreign exchange for the purpose of financing imports, and a rate for licenced money exchange
69
Most of the assessments shared during the course of the research were confidential.
70
International Rescue Committee (2015) ‘Assessment Report Idleb and Aleppo, Northern Syria,’ (1-13 April), p.5
companies. Outside of these official channels, there is extensive trading on the black market, through
networks within Syria and in neighbouring counties, primarily Lebanon, that have developed over
many decades as a means to circumnavigate the restrictions of the state system.71
The gap between the official rate and the black market rate has tended to be 5-10%, although for a
short period in late 2013 the cost of USD on the black market was actually lower than the official
rate.72 The CBoS brought in the special rates for banks and money-changers in July 2013 after the
black market rate briefly soared over SYP300 to the USD. By March 2015, the official rate for the
SYP was about 75% below its level four years earlier, and the black market rate had depreciated by
more than 80%.
Daily updates on black market currency rates for Damascus and rural surroundings were, until 28
April 2015, published on Facebook.73 Above left is an extract showing rates calculated according to
the black market rate of the USD for 27 April. Another website compares black market rates for
Aleppo to CBoS rates and the price of gold.74 Hama appears to be a new foreign currency hub as it
receives money from all over the country, and is reportedly flush with dollars.75 This indicates that
rates there may be more competitive when negotiated on the black market.
It is important for aid agencies to be aware of these advertised rates in their negotiations because of
how integral currency exchange is to cash transfers. For example, all 17 MSBs we interviewed in
areas held by JAF stated that they only disburse local currency: USD are not dispensed except
through exchange, meaning you first receive the transfer in SYP and then it is possible to exchange
into USD – this way the exchange house makes money twice; once on transfer, and once on
exchange. All MSBs stated that they have no bank accounts in Turkey and that they receive cash
through their Turkish/Syrian ‘super-agents’. It would be advisable to consult with those wholesalers
regarding whether they would be flexible on the pay-out of dollars.
3.2 COMMISSION
Clearly another important factor when considering the cost of cross-border cash transfers is the
commission. This is paid by the majority of NGOs after the transfer has been completed, and in the
cases recorded by the CBR-TWG, the payments are always made in cash. One respondent paid a
71
David Butter (2015) ‘Syria’s Economy: Picking up the Pieces,’ Chatham House (23 June)
72
Ibid.
73
https://www.facebook.com/AlaqtsadAlswry/photos_stream?tab=photos_stream.
74
Available here: http://halabnews.net/news/category/‫أخ بار‬-‫اق ت صادي ة‬
75
Information provided by Dr Rim Turkmani, London School of Economics.
rate of 0.4%, while another paid between 0.05 and 0.07%. These rates show that those three
members have a good sense of the market.
Interviews with individual NGOs, however, revealed that some are not getting good value for money.
In a number of instances, commission rates fluctuated wildly between NGOs in Turkey and Lebanon,
signifying a lack of coordination. At the most extreme, one NGO’s rate was as low as 0.03%, while
another was paying 7% for a similar amount to a comparable area. The commissions cited in Iraq
ranged more consistently from 1-2.5%, depending upon geographical location in north eastern Syria.
This is partly due to more open coordination, and also because a number rely on the same agent.
From the UK, commission rates tend to be higher, in the range of 3-4%. For example, Trust MT,
formerly Sahloul and Kamar Trading Services Ltd, are based in London (with bank accounts in Dubai)
and take a commission of 3.7% for transfers to all areas in Syria. The benefit of using a registered
MSB in a country like the UK is that they are regulated by the Financial Conduct Authority and are
obliged to conduct suspicious activity reporting and to safeguard funds. This particular company
charges an extra 1% ‘premium charge’ for bank guarantee with re-imbursement, a service that seems
difficult to arrange in Turkey. Generally, cheaper rates can be found in areas like Gaziantep, although
there is no official paper trail and it is therefore more difficult to track.
Hawaladars explained that the rate would naturally improve with the guarantee of a longer-term
relationship, which involves frequent and sizeable payments. Overall, the commissions paid tended
to be substantially lower than commissions cited by people sending and receiving remittances, which
makes sense when they are sending much smaller amounts. 76
3.3 COLLECTION METHODS
A survey of 300 people on remittance practices conducted by the NRC in southern and central Syria
revealed that only a small proportion of remittances are received by bank transfer. The majority of
money transfers into Syria are facilitated by a money transfer company, a family connection or
through well-connected businessmen.
Before 2011, only 20% of the general population in Syria used formal banking.77 Limited access and
low trust in the system contributed to the still largely cash-based economy.
76
Refer to the analysis from NRC’s comprehensive survey, reported in ‘Remittance Modalities in Syria’ (June, 2015).
77
Percentage of population (age 15+) with an account at a formal institution, using data from World Bank (2014) ‘Global
Financial Development Report 2014 – Financial Inclusion’.
In situations not involving cross-line payments, the NRC survey revealed that funds are most often
collected by the recipient at a money agent’s office. In rare cases, the pick-up area is in a third
location agreed by both the agent and recipient. Most recipients reported that they feel comfortable
travelling up to six kilometres to receive funds, and that this option is accessible to women, the
elderly, and minors under sixteen.78 Especially in cross-line collections or pay-outs where people
travel longer distances, some agencies reported to us that the nominated third party collector is most
often female, due to protection concerns for men around forced recruitment, harassment and
kidnapping at checkpoints or in transit.
Suggestions for how to reduce the risk of the intended beneficiary not receiving the transfer are
included in the next chapter.
3.4 ACCOUNTABILITY
The only formal documentation between implementing NGOs and transfer agents to date appears to
be a cash receipt (Annex 4), and this is not a requirement in all cases. Several NGOs were in the
process of drafting contracts during the research, and it was unclear whether the hawaladar will agree
to sign. It is our view that wholesale and corporate hawala operators will be prepared to provide more
documentation than what has so far been provided.
Following several weeks of consultation, which included the review of parallel contracts from
Afghanistan, Somalia and Syria, and a dedicated 1-day meeting with specialists within law
enforcement, we have mapped out the terms of a sample contract in Annex 2. We encourage aid
agencies to talk this through with the providers to get clear agreement on the roles and
responsibilities in the partnership.
NGOs and UN agencies consider that the ultimate test of accountability lies with how reliable the
agent is in delivering the funds, as agreed. All three of the CBR-TWG members would recommend
their agent to other organisations and say their agent has acted honestly and there have never been
any issues with IVTS transfers. In our online survey, respondents also gave positive feedback on
their agents, indicating the reliability of the current system. One person’s comment, “All transferred
amounts reach final destination”, was an almost universal response across the individual interviews.
78
Dean, ‘Remittance Modalities in Syria,’ NRC
However, the system is only reliable and ‘safe’ in the wider sense if aid agencies conduct appropriate
Know Your Supplier (KYS) due diligence. Simple steps are recommended in Annex 3, and these
should be discussed openly in conjunction with the dealers. To date, it does not appear that any such
conversations occur between humanitarian staff and the hawaladars. Aid agencies appeared to have
limited knowledge of the agent’s background, or the particular security risks taken on by them and
their network in facilitating the money transfer. Our experience is that this information is possible to
acquire, so long as there is sufficient trust and a real business proposition presented to them. Again,
the specific risks will be considered in more detail in the next chapter.
3.5 CONCLUSION
The interviews revealed a universal view that the hawala system operating in Syria today is reliable,
judged on the fact the money is delivered in full and within a reasonable timeframe; this was
especially the case in contrast to personal cash couriers. While we can attest to the fact that the
system does work, and is historically shown as a dependable way to move value in a crisis, the Syrian
context is constantly changing, and so any data collected must be updated on a regular basis by
people with the appropriate understanding.
What must be emphasised is that most INGOs and UN agencies are making decisions based on
limited due diligence, and some are paying inflated commission rates to hawaladars. This inevitably
means money that could be used to aid beneficiaries is being lost to the intermediaries. It is
recommended, therefore, that humanitarian agencies coordinate their efforts better in judging the
suitability of a particular hawala operation, and the appropriate commission. Third party due diligence
is explored in more detail in Chapter 4.
4. RISK ASSESSMENT
There are three main types of risk that are relevant to this assessment: doing more harm than good,
fiduciary, and legal. Given the changing nature of international sanctions and fluid regulatory context
of the countries immediately surrounding Syria, the legal context is deeply complex, and so requires
professional legal advice. Our focus will therefore be on conflict sensitivity and fiduciary risk.
What is Do No Harm?
Do No Harm is an attempt by humanitarian aid and development cooperation to monitor the intended
and unintended impact of their activities in order to avoid contributing to instability and violence.
Especially in conflict situations, assistance can be used and misused by people who pursue political
and military advantage. Understanding how this occurs enables aid agencies to prevent their
assistance from being distorted for the promotion of conflict.
The Do No Harm project points to two main areas requiring analysis, summarised in the following
statements and questions:
Resource transfers have an impact.

– What resources? How are they distributed?
– Who benefits? Who gains power or control?
Implicit ethical messages are conveyed by how the agency works.

– Who has authority or legitimacy?
– Who is using interactions with you to create legitimacy by appearing to serve the people?
– Whose life or property is more important?
These questions require a thorough understanding of the context in which assistance is provided,
which in turn helps to clarify whether aid is inadvertently being diverted to parties to the conflict, and
any legally sanctioned entities or individuals. 79 By confronting these risks, the organisation will be
better equipped to comply with the relevant financial sanctions regimes, and avoid doing more harm
than good.
What is fiduciary risk?
DFID defines fiduciary risk as the risk that funds:
 are not used for the intended purposes;

 do not achieve value for money; and/or
 are not properly accounted for.
The realisation of fiduciary risk can be due to a variety of factors, including lack of capacity,
competency or knowledge; bureaucratic inefficiency; and/or active corruption. 80 These are similar to
the five constraints that were identified by Afghans as limiting the positive impact of UK aid in their
country at the 10-year anniversary of NATO’s intervention: Conflict and criminality; Corruption;
Capacity; Complexity; Competing interests; and Common sense.81
79
These political economy assessments can be found elsewhere. Please contact Beechwood International for more detail.
80
DfID (2006) ‘How to Note: Managing the Fiduciary Risk associated with Social Cash Transfer Programmes’ (Jun)
81
Edwina Thompson (2012) ‘Losing the Ability to Dream: Afghan Perceptions of UK aid,’ British & Irish Agencies Afghanistan
Group (BAAG)
Donors recognise that fiduciary risk is inherent in both crisis-affected countries, and in programmes
involving direct cash transfers to beneficiaries because of the high volume of low-value payments
being distributed. But while there will always be some rate of error and fraud, and there is no fail safe
solution to operating in fragile contexts, they advise their implementing partners that appropriate due
diligence and effective controls will help to mitigate such risk.82
The management of risk related to both conflict sensitivity and fiduciary concerns involves three key
stages, which will be addressed in this section: (1) defining; (2) evaluating; and (3) mitigating the
risks.
4.1 DEFINING RISK
The first point the Do No Harm project encourages aid agencies to recognise is that all aid
programmes involve the transfer of some resources into a resource-scarce environment which, for the
local people, represent power and wealth. Hence they can inadvertently contribute to the conflict,
frequently changing the balance of power in the community.
The five mechanisms include:
1. Diversion: Theft, allocation effects

2. Distortion: Market effects
3. Distribution: Control of resources
4. Dependency: Undermining local production
5. De-legitimisation/Legitimisation: Manipulation of persons and groups
The two areas of most relevance to the purpose of this assignment (examining the use of IVTS – and
specifically hawala – to transfer money into Syria) are: diversion and de-legitimisation/legitimisation.
These are incorporated in the accompanying Risk Matrix.
Donors advise that the best way of mitigating fiduciary risks is to ensure that effective but appropriate
controls are built into the programme into the design stage. It is helpful to keep the operation of the
programme as simple as possible, particularly by making the criteria used to assess the eligibility of
beneficiaries straightforward, while still ensuring that the basic objectives of the programme are being
met (taking simplicity to its extreme would allow for no targeting of groups within the population at all).
Once in operation, programmes also need to be monitored and evaluated to provide an early
indication of any failure in the controls. And the level of fiduciary risk needs to be reassessed
periodically to ensure that it remains within acceptable limits.
A due diligence assessment is the basis on which the design phase should be built. Official bodies
that regulate charities83 advise that any due diligence should be proportionate to the:
 General risk of the context

 Nature of the work, including the type of existing and planned activities
 Amount of expenditure involved
82
USAID, often the largest official aid donor, also requires that its contractors and grantees have ‘effective internal controls’ and
follow best practices for managing cash disbursements. See Title 22 of the Code of Federal Regulations, s.226.21(b)(6); Office
of the Inspector General Country Office in Afghanistan (2011) ‘Review of Cash Disbursement Practices of selected
USAID/Afghanistan Implementing Partners,’ Report No. F-306-11-002-S.
83
For example, the UK’s Charity Commission has provided this web resource: ‘Charities: how to manage risks when working
internationally,’ accessed at: https://www.gov.uk/charities-how-to-manage-risks-when-working-internationally
A more rigorous exercise, or ‘enhanced due diligence’, is recommended where charities have one or
more of the following, as is the case in Syria:
 Complex service delivery arrangements

 High profile or sensitive work
 Operations in a number of geographical locations
 Operations using one or more legal entities or trading subsidiaries
 Restricted funds
4.2 EVALUATING RISK
Almost all INGOs appear to delegate the decision-making on hawaladar selection to local partners.
The only formal background checks involve screening the name and date of birth of the agent against
the global sanctions lists. Selection criteria appears to be predominantly based on the most
competitive transaction fees, or trust/pre-existing familiarity with the dealer concerned. This is
reflected in the service contracts, which tend to be signed for the transfer fees only.
One INGO explained that the decision-making is handed over altogether because of specific
sensitivities around personal security and data protection: “From our side, we have not mapped out
these ‘hawalas’ that our partners use because we have been concerned about collecting this
information; our data security is not strong enough and if it was released, or in the hands of the wrong
agent, the hawalas could be shut down, and our mechanisms of getting funds to partners inside could
be compromised.”
Another interviewee explained that: “all of our agents are working in the grey sector. While they have
provided names and personal details for vetting, neither agent is willing to provide further information
that would allow more detailed background checks, for example how the funds from the commission
are used. Like all banks, they do not operate a 100% transparent system. The security measures in
hawala systems actually protect our programme and the field officers too. Not using hawala would
significantly change the nature of our programme and will set in train the need to accept of a whole
raft of other risks.”
Fears around security have created literal firewalls between the operations of humanitarian agencies
operating in both government- and opposition-controlled areas. This existed even in an INGO
operating from all sides cross-border into Syria. Most recognised that this is very problematic, but is
necessary for data protection purposes. Syrians were much more open in sharing information. They
painted a picture, however, of genuine risk to their lives when dealing with money. One NGO worker
who had fled Damascus explained that in the government-controlled areas: “Even if you have dollars
in your pocket you can be beaten and put in prison. When you get caught, you don’t pay with your
money, you pay with lives – yours and your family”.
The security constraints were reported very differently by Islamic charities operating in opposition
areas – we interviewed three in rural Idleb, urban and rural Aleppo and Saraqib who receive funding
from Bahrain, Kuwait, Qatar and Saudi Arabia. Combined, their annual operating budgets are
USD6.3 million. They claimed that they operate freely, bringing USDs into their areas, but only with
the good will of the Islamic-leaning opposition groups: “we have operated for 19 months, and have not
lost a single dollar to theft by criminals or extortion by military groups”. Once this is secured, they
reportedly do not hinder or interfere with their operations.
Despite this, each of them has decided that with cross-border cash flows, they would organise the
transport themselves by taking it physically or arranging a courier. They claimed to avoid hawaladars
deliberately for confidentiality reasons. One charity explained: “we don’t want them to know our cash
flows and budgets because people talk too much. Once people in Syria know your budget, the more
local politics you will be dragged into, with villages asking for bigger grants and projects. So we bring
the money in, and exchange it into SYP with the small dealers”.
Another interesting point about diversion was made by several interviewees when discussing the
practices of Jabhet Thowar Souria. Allegedly the group was unsuccessful in winning local legitimacy
because of its demand for informal taxes, and subsequent militant groups have learned that they must
provide services if they are to charge the people fees. This appears to be different only at border
points, both cross-line and international, where consistent fees are charged for transiting goods. The
rates are usually evaluated based on the value of the load. One recent study indicates that
USD600,000 is generated daily in informal taxes on trucks entering Syria from the two main border
crossings with Turkey: Bab al-Hawa and Bab al-Salam.84
These observations are intended to inform the attached spreadsheet for evaluating risk (refer to the
Risk Matrix tool). The assessment is divided into two main parts: optimising value for money, and
minimising negative impact. On the basis of all the data collected during this field investigation, it
considers the likelihood of specific risks occurring, and the impact if those risks eventuate. The
assessment should be read in conjunction with the tables below, which outline possible mitigating
steps. The risk before mitigation steps are taken (‘inherent’ risk) is rated, followed by the risk after
mitigation steps are taken (‘residual’ risk). Residual Risk means the portion of an original risk or set of
risks that remain after mitigating measures have been applied.
4.3 MITIGATING RISK
ACCESS: OPTIMISING VALUE FOR MONEY

Risk Suggested mitigation process
1. Most vulnerable  Regularly share information with OCHA so that the inter-agency
under-served mapping is as timely and accurate as possible to inform individual
programming decisions.
 Designate an international aid worker and Syrian aid worker (relevant to
the geographical area) to consult regularly with trusted representatives
in the cross-border money transfer business, and share the updates in
coordination meetings.
 In the gap analysis, gauge and monitor the extent of other external
support reaching the people (diaspora, local businesses, faith-based
channels), and methods. Ensure these are not inadvertently affected by
putting too much pressure on them.
2. Disruption due to  Develop simple and clear SOPs*, including risk management
conflict procedures, with provider on signing the contract. Consider mitigation
activities around:
- lost/stolen/destroyed records (e.g. where the provider does not
have an electronic platform that can generate daily reports,
photograph all manual records of the amounts disbursed to
intended beneficiaries and email at the end of each distribution
cycle as confirmation)
- lost/stolen/destroyed money (e.g. safeguarding practices in transit
and in situ; emphasis on speed of transfer and distribution;
agreement on volume limits – ‘little and often’ vs ‘more and
seldom’)
- severe injury or death of provider (e.g. ensure an alternative point
of contact).
84
See Rim Turkmani et al. (2015) ‘Countering the Logic of the War Economy in Syria: Evidence from three local areas,’ London
School of Economics (30 July)
3. Obstruction by  Understand provider’s transfer methods (see section 1: How IVTS

government authorities works)
 Check the domestic regulations of the sending country that relate to
those methods (see section 2: Country profiles)
 Consider the currency in which payments will be made as this has an
impact on applicable sanctions legislation (see section on USD).
 Coordinate with other agencies in engaging with regulators to determine
the legality of the payment, and find details of any specific or general
licence which permits the transaction.
 Consider geographic variations in the application of laws (e.g. at certain
border points). Refer to field staff to understand the specificities of the
border control.
 Assign an inter-agency focal point to maintain relationship with local
authorities to keep pace with changes to the regulations (maintain an
updated contact list for all agencies).
 Use most trusted third party to advocate with the relevant information,
stating the legal case for providing the assistance (IHL, UNSCRs).
4. Excessive fees and  Use best negotiators on your team with a good understanding of how
charges the market operates
 Explore collaboration options with other humanitarian agencies to
negotiate optimal rates
 Stipulate in the contract the strategy for use of currency and inflation
 In seeking cost-efficiency, do not always select the lowest bidder;
increased internal controls cost money, and ‘dirty’ cash is cheaper for
dealers to move
DO NO HARM: MINIMISING NEGATIVE IMPACT

Risk Suggested mitigation process
1. Diversion of funds  Conduct and share local-level political economy analysis, and update
whenever there are certain triggers (e.g. flash displacement; change in
control or management of checkpoints), to inform targeting and risk
mitigation strategy.
 Conduct due diligence (ref KYS guidance) to check the provider’s:
- beneficial ownership and affiliations
- obligation or pressure to pay informal taxes
- witting acceptance of goods from a source controlled by a warring
party
 If using cash courier method, record serial numbers and conduct spot
check with beneficiaries on the notes received to avoid laundering
someone else’s cash. The recording can easily be done using a cash
counting machine from the sending country (Turkey, Lebanon, Jordan,
Iraq).
 Reduce visibility of the distributions/pick-up by staggering the payments,
changing location and timing.
 Conduct in-depth debrief with field staff and partners post-distribution,
and conduct spot monitoring to check beneficiary’s:
- obligation to pay informal taxes to armed groups
- voluntary donation of a portion of the transfer to support an armed
group
 Set up anonymous hotline (voice and text) for reporting suspicious
activity without fear of retaliation.
 Establish clear and quick reporting mechanism for non-compliance.

2. Facilitation of  Conduct due diligence (ref KYS guidance) on the provider’s:
harmful illicit trade** - liquidity supply or
- connections to particular traders that act on behalf of warring and
designated parties.
 Analyse supply chains that interact with your markets, and watch not
only for obvious harmful illicit trade – e.g. trafficking in arms, people and
antiquities – but also tobacco, staple foods (flour), and transit goods
such as ivory.
3. Facilitation of  For staff, follow organisation’s internal policy and procedures on
corruption, fraud preventing financial loss and maintaining high accounting standards.
 For hawala provider, use reimbursement-only mechanisms that involve
payment on confirmation of delivery of cash to the intended recipients.
 For cash courier, decide with the provider the procedures for liability
during transport.
4. Distortions in the  Set up shared market monitoring framework per local area, covering:
local economy - supply
- prices
- integration with neighbouring country
- adaptability to changes in the security situation
 Consider a cash voucher scheme where vendors are selected and
advance notice provided to them about expected sales as per the
beneficiaries’ needs and amounts distributed to allow the supply of
sufficient stock; pre-agreed prices are advertised to beneficiaries.
5. Physical security  Outline in the contract the responsibilities for transport, handling of
compromised funds, provision of security, and data protection.
 Map the flow of money and identify the key points of insecurity that
involve the agent, NGO worker, and intended beneficiary.
 Evaluate whether it is safer to separate delivery of transfer to beneficiary
and monitoring that they received it – i.e. safer to collect from hawala,
then be spot checked later, which might reduce risk to everyone and
prove more flexible.
 Ensure currency does not attract more issues for the people.
 Ensure clear and effective communication of project objectives and
selection criteria to the community; blanket distributions where the
situation is unclear, but the needs are high.
 Limit the number of people according to the capacity that the outlet can
handle daily, and decide on a set collection period, to avoid
overcrowding and any unnecessary travel if the cash is not there.
*Create Standard Operating Procedures (SOPs) in conjunction with your provider on the
following areas and division of roles and responsibilities:
 Currency and exchange rate (i.e. whether it is SYP or foreign currency; SYP pegged to USD,
or renegotiated immediately prior to each distribution)
 Commission rates per area and agreement on the conditions where they should be revised
 Monetary limits for individual transactions which reflect: (1) capacity of the money exchange
dealer; (2) security situation at the origin and the intended destination of the funds, and; (3)
capacity of the recipient to maintain cash holdings on their premises.
 Reimbursement-only policy where the remitter will only pay the service provider after (1) the
correspondent service provider has made payment of the agreed amount to the intended
recipient, and; (2) the recipient has acknowledged receipt of the funds verbally and in writing.
 Collection period, opening hours, and location

 Issuance and verification of distribution lists
 Reconciliation of lists post-distribution
 Management of an absentee list (this could indicate over time that vulnerable groups, such as
elderly, disabled, children find the collection too difficult)
 How to manage delegation of collection either in bulk or per individual/household
 Complaints mechanism to ensure service quality
 Triggers to consider when terminating the relationship, or incurring penalties/suspension
period where the terms of agreement are broken (e.g. agreed fees/prices)
 Communication protocol both internally (to ensure any issues are dealt with in a timely way)
and externally (to ensure that beneficiaries are aware of the support’s origin – i.e. Charity
versus authority)
** A relationship with a formal financial institution also provides some measure of comfort about the
AML/CTF checks done on the money exchange dealer because banks are mandated to report any
suspicious transactions involving client accounts. This measure provides additional oversight over
this risk, and also the probity of the dealer.
4.4 CONCLUSION
This chapter has shown that appropriate due diligence and effective controls when engaging IVTS will
help to mitigate the risk related to both fiduciary matters and doing more inadvertent harm than good.
An example of the impact of risk mitigation can be seen below. As the tool demonstrates, the factors
will vary depending on the area.
As with other similar contexts, hawala dealers seldom fail to effect payment; we were only informed of
instances where payments were delayed or were rendered impossible due to insecurity. Besides the
expected high standard of adherence to codes, default risk of loss is eliminated through the
‘confirmation-before-payment’ or ‘reimbursement-only’ process. The risk of diversion and inadvertent
legitimisation of certain groups is also decreased with a better understanding of the context.
Overall, the interviews with hawaladars and MSBs revealed the importance of building a relationship –
they are likely to be more honest about what is feasible if there is a strong base of trust. The benefit
of using a larger dealer is that they are able to share a much bigger picture of the situation on the
ground; the advantage of using a much smaller agent who just operates in one corridor is that they
are intricately involved in the local dynamics of that context. Either way, they will know the risks well.
A good indication of whether they are trustworthy in the first place is to conduct a ‘Fit and Proper’ test.
In a country like the UK, regulators use such a test to gauge three key factors about the person:
honesty, integrity, and reputation; competence and capability; and financial soundness. In Syria, this
would amount to testing their local standing in the community, which would take into account all these
factors.
Once this is established, the draft terms of a service contract could be drawn up to talk through with
the dealer (see Annex 2). While this may not be signed or backed up by laws that will safeguard an
NGO’s practices when using an IVTS, it will help to clarify the expectations of each party. The aim
should be to keep it as simple as possible, and explain clearly what the requirements are in order to
help prevent inadvertent contributions to money laundering and terrorism finance.
5. CONCLUSION AND RECOMMENDATIONS
In light of the crisis context, it is clear that there is no ‘fail safe’ solution to transferring money into
Syria. However, improvements in a number of areas related to conflict sensitivity and due diligence
should lead to a meaningful increase in financial compliance and optimising value for money, and in
turn better access to the most vulnerable people. There are lower risk routes for transferring money
safely and securely into Syria, and ultimately the call must reside between the donor and those with
the best understanding of the context, where the trade-offs are most easily identified.
Coordination is critical whichever route is taken. Due to the constraints identified in the report, we feel
that there is a need for a simple, consistent tool for aid practitioners to apply without delay, and that
can be aggregated so that it is used by all stakeholders – this will bring a level of transparency, rigour
and flexibility that is missing from current practice.
In Chapter 4 we proposed that practitioners should make use of what is intended to be a dynamic tool
for evaluating inherent and residual risks related to engaging IVTS (the Risk Matrix and
accompanying mitigating factors). This can be shared between all agencies without concerns about
data protection. Clearly, the factors will vary in significance in terms of probability and impact
depending on the area, and it is the operational staff with access to Syria who will add the required
granularity to the assessment.
To ensure a coherent humanitarian response, the strategic perspective should not be overlooked in
the process of managing risk at the local level. An initial discussion is required among the right
technical and operational people, supported by appropriate management staff, to help frame a
strategic start point. We offer the following concept to guide that conversation in the early stages of
programme design.
5.1 ENSURING A COHERENT APPROACH
There are three dimensions to be considered in such a discussion about the delivery of tangible
humanitarian aid (rather than services):
1) the type of governing authority in the region being addressed – recognition that a
particular group or groups will be governing the space in which an aid agency is operating,
and that it is necessary to negotiate or know the agency’s limits depending on their respect
for IHL, and whether financial sanctions prevent direct engagement;
2) the most appropriate type of aid modality – in this instance, the three main modalities are:
commodity; indirect cash (commodity voucher or community infrastructure project); or
direct cash (unconditional transfer; cash-for-work); and
3) the timeframe – whether the intended action or decision is primarily impacting the short-,
medium- or long term needs of a population.
The starting point is necessarily unique to the particular team of aid workers, and adapted to each
local context. The following includes two hypothetical examples:
 Da’esh is demanding 40% of all Western aid in its areas of operation. An INGO decides that
it will not operate there because the level of diversion of funds and legitimacy afforded to the
group is too great. Instead, the team congregates to discuss how it could operate in other
areas which they suspect are vulnerable to Da’esh’s expansion (i.e. contested areas, where
they are accustomed to filling a vacuum). If they consider the poverty levels of two such
areas – Talbeeseh and Houleh in the northern countryside of Homs – they may look at
starting up an urgent Cash-for-Work programme to engage the demographic that is most
vulnerable to recruitment by Da’esh.
For example, employ military-age youth in longer-term agricultural or other livelihoods

projects, and thus eliminate the economic needs that drive them to sign up. Da’esh pays
competitive salaries for Syrian fighters – around USD400/month, and civil servants – around
USD200/month, plus their family members – USD50-100 per wife or child. Therefore any
Cash-for-Work programme needs to take into account these factors. Alternatively, the group
might consider engaging local traders, and creating a six-month cash voucher programme,
supporting people’s basic needs, and injecting stimulus into markets trading goods sourced
from legitimate suppliers, such as local farms. Or they might find that the most appropriate
mode of support is the delivery of food assistance.
 It seems that local staff can only gain inconsistent access to several districts in rural Aleppo,
but strong local councils exist. To date, the agency’s aid has been distributed close to the
border and around the city of Aleppo. In the discussion, the group considers conducting
training sessions with council members in the rural areas for the dissemination of
unconditional cash support to the community. This requires several weeks of planning, but
due to the capacity of the hawaladars in the area, it is possible to reach a significant number
of households in need of assistance, who have otherwise been left out of distributions.
AOGs without a terrorist designation demand small fees at checkpoints between the areas of
operation, but guarantee safe transit for the goods or cash. It is decided that these fees are
to be included in the commission charged by the agency’s hawaladar, and so he takes on the
responsibility of any changes due to the allocated contingency costs. Another option the
group might explore in the discussion is to fund small-scale infrastructure projects advertised
by local councils in the area through Facebook pages. This would involve less risk exposure
due to bulk transfers, some of which could be made into the bank accounts of suppliers in
Turkey. On further assessment, it appears that the councils in the rural areas have more
legitimacy or ‘right to lead’ than those in the cities, where it is more difficult to represent the
interests of everyone, and they are not accustomed to this type of informal governance.
Therefore coordinating with them on a cash voucher or transfer programme appears feasible.
These examples are simply meant to illustrate the type of conversation that can be had when both
grounded in the specific local context and framed by a more strategic discussion, and are offered in
the same spirit as the funding guidelines of ECHO on the Use of Cash and Vouchers in Humanitarian
Crises: ‘The final decision on the best modality requires a case-by-case approach, calculating the
trade-offs at the local level.’85
The reason why it is so important to focus on the timeframe is because there appears to have been
delays in the response so far, and due to risk aversion, plans continue to be for very small scale
support. While pilot programmes are certainly always recommended, it is inefficient for all agencies to
be conducting them concurrently, when this could otherwise be coordinated, at least per donor and
area, and scale reached more quickly. During the research, only one agency mentioned that they had
developed a cash contingency plan to cater for emergency situations, such as flash displacements
and besieged areas; this approach had not been tested or discussed in detail with the financial
service providers. This is something that should be explored in tandem with longer-term
programming.
5.2 RECOMMENDATIONS
The following recommendations are necessarily general, but reinforce the conclusion that a more
deliberately due diligent and conflict-sensitive approach to decisions on the use of IVTS is called for.
They also highlight the central role of donor government departments in managing the risks of
transferring cash or value to the Syrian people at this time. It is not enough for the development
agencies to ensure that humanitarian money continues to flow safely to the intended destination;
donors must also draw deeply on their diplomatic, forensic and intelligence capabilities to stay abreast
of a rapidly changing and complex environment.
 Aid agencies should review who their providers are, and identify whether they are
retail, wholesale, or corporate hawaladars. It is not sufficient to take on trust the personal
details provided by the agent concerned and check these against sanctions compliance
screening software. If they are a retail dealer based in Gaziantep or Erbil, for example,
agencies should also investigate whether there are others up the chain controlling the
network, based in commercial centres nearby. Financial controllers should engage with the
wholesaler and discuss their plans; these should include options for contingency cash
programmes that meet the needs of people who are frequently displaced and therefore
difficult to reach with sustained support.
 Financial service providers taking on so much responsibility must be treated more like
a partner than a supplier. Building relationships will help to create a better mutual
understanding of the needs and constraints in the environment. More creative monitoring
systems can also be developed this way, along with ways to achieve more geographic
coverage than what is assumed as feasible by INGOs today. A clear Memorandum of
Understanding or SOPs should be developed with the partners, outlining the details of the
85
DG ECHO Funding Guidelines on the Use of Cash and Vouchers in Humanitarian Crises (Ref. Ares(2013)317021 -
11/03/2013), p.15
agreement between the parties. It should include success indicators, mitigating and managing
risk procedures, monitoring mechanisms, and agreed terms for terminating the arrangement.
 The costs of commissioning or conducting enhanced due diligence (EDD) in such a

complex context are a proper use of charitable funds, so should be an accepted line
item in the budgets of Syrian response programmes, and reviewed regularly so that
they remain proportionate to the risks involved. Donors might consider pooling funds to
create a central KYS/KYC processor for its partners, which can check remitter and recipient
data against the various sanction lists, and deeper sources available from the law
enforcement communities in the donor countries. If through EDD the less competitively
priced dealers are revealed as more expensive due to better internal controls, donors should
notify partners that this is an acceptable trade-off. However, it is likely that with better
coordination and diligence, more competitive overall pricing structures can be negotiated.
 Once EDD has been achieved, humanitarian agencies should prepare a clear outline of
their internal due diligence processes, which will help in their discussions with the
banks. This will go towards helping the banks understand how charities operate in high-risk
jurisdictions, and provide ‘compliance assurance’. Agencies should also consult advice
prepared for them on behalf of legal experts. There are examples of public advice, 86 but we
were also shown some individual agencies’ advice provided by external lawyers. This should
be shared with other agencies through coordination platforms to avoid duplication and
maximise the benefit.
 Donors and heads of UN agencies should appoint a specialist team or high-level

interlocutor with the relevant authorities to ensure that humanitarian agencies are
informed of any changes to the regulations, and well-supported in any necessary
advocacy for such changes. This requires a sensitive and honest dialogue.
Compliance with the regulations of neighbouring countries is complex and difficult due to the
dynamic environment, involving four different regulatory regimes (Turkey, Jordan, Lebanon,
Iraq).
 Coordination platforms like the CBR-TWG are essential, and must be attended by
sufficient numbers of Syrian staff to ensure the discussion is grounded in the various
local contexts. Members should agree to a shared risk management approach, which has
benefited from consultation with key stakeholders (hawaladars, relevant government officials,
donors, UN agencies, local councils). To improve coverage, agencies should use platforms
like this and the cluster system to engage collectively in a transparent and rigorous risk
analysis of specific regions for all humanitarian interventions (cash and in-kind), and jointly
determine where responsibilities lie for the resource transfer, which in this case is cash via
IVTS. To improve responsiveness, the group could develop contingency plans for certain
types of scenarios affecting short-, medium- and longer-term programming. Again, it is
important to prepare for flash displacements of the population caused by heightened
insecurity.
 We recommend an urgent regional meeting with technical experts to share lessons and
ideas in as open and interactive a way as possible. There are insights to be shared from
programmes which are ongoing, such as UNRWA’s extensive cash support to Palestinian
refugees, and regional interventions in support of Syrian refugees (where they are using the
latest technologies for beneficiary identification, i.e. UNHCR Jordan87), and historical
86
British Bankers’ Association, Disasters Emergency Committee and Freshfields Bruckhaus Deringer LLP (2013) ‘Getting aid to
Syria: Sanctions issues for banks and humanitarian agencies’ (Dec)
87
UNHCR (2015) ‘Biometric Cash Assistance,’ accessed at: http://innovation.unhcr.org/labs_post/cash-assistance.
examples, such as in Syria before the war with programmes like WFP’s use of electronic cash
vouchers to support to Iraqi refugees as an alternative to food distributions. Donors must be
present because, while working through partners may provide distance between them and the
fiduciary risks, ultimately, the risks – including reputational – are still borne by the benefactor
of the funds.88
88
DFID, ‘Managing Fiduciary Risk when Providing Financial Aid,’ p.8

Technical Assessment Humanitarian Use of Hawala in Syria

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What risks are associated with using informal value transfer systems for humanitarian aid?

What risks are associated with using informal value transfer systems for humanitarian aid?

TECHNICAL ASSESSMENT

Humanitarian use of Hawala in Syria

Prepared for aid agencies conducting

Acronyms and abbreviations i

EXECUTIVE SUMMARY iii

1.1 Background and aim 1

2. HUMANITARIAN FLOWS TO SYRIA: CAPACITY OF IVTS 21

3. IVTS INSIDE SYRIA: PROCESS AND SYSTEMS 27

4.1 Defining risk 33

5. CONCLUSION AND RECOMMENDATIONS 40

5.1 Ensuring a coherent approach 40

Attachment: Risk Matrix tool

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Acronyms and Abbreviations

AML Anti-Money Laundering

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About the author

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The three main objectives of this assessment are to:

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 Mapping cash or value transfers reveals deep interconnections between different

 Effective due diligence of financial service providers is complicated by the sheer

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1.1 BACKGROUND & AIM

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- Pre-war (2011) and current relationships with Syrian correspondent MSB

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- What happened to pre-war registered entities that are no longer in operation

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1.3 PURPOSE AND MECHANICS OF IVTS

BOX 1: IDENTIFYING AN IVTS

COMMON BUSINESSES OPERATED IN CONJUNCTION WITH AN IVTS

From the customer’s perspective, within minutes of a hawala representative – or hawaladar –

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Figure 1: Typical debt settlement from migrant remittance

 Transaction offset: in an established network, transactions can be coordinated between

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1.4 REGULATION OF IVTS

BOX 2: INTERNATIONAL OBLIGATIONS

Financial Action Task Force, Special Recommendation VI on Alternative Remittance Systems

Concerns of financial regulators and law enforcement remain the:

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BOX 3: CORRESPONDENT BANKING

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Cross-border cash flows

Cross-border money transfers

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Cross-border cash flows

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