Black-market money transfers in Pakistan, known as Hawala, are done verbally, leave no paper trail, and fund much of the Islamist violence in northern Pakistan; Osama bin Laden used it to fund his terror operations, according to the 9/11 Commission.
U.S. officials are frustrated with the Pakistani government for not cracking down on the practice, which thrives in tribal areas under Taliban command.
Although some money transfers are legit, like wage remittances, much is disguised as zakat, a Muslim charity tax, that funds the work of Muslim mosques, madrassas and militias.
Wealthy donors who feel a religious obligation to give to charities and “don’t think too hard about where it goes,” one U.S. expert told the Guardian. Trying to regulate zakat is “impossible,” he adds.
“Faith, charity and the money trail to militants”
Guardian (U.K.), August 26, 2007