Does Treasury Believe Spreading Our Flawed Banking System Is a Solution to Terrorism?

Sheldon Whitehouse had a hearing on terrorist finance the other day. There was an interesting exchange that I think bears notice.

The hearing focused, in part, on hawalas, not least because DOJ recently prosecuted Mohammad Younis, the guy whose hawala Faisal Shahzad used to fund his terrorist attempt. Richard Blumenthal suggested (around 75:50 and following) that that funding may have come from Pakistani authorities (implicitly, the ISI). The FBI’s acting head of counterterrorism wouldn’t answer a question about that in public session.

A more interesting response came from Treasury’s Assistant Secretary for Terrorist Financing, Daniel Glaser. Sheldon Whitehouse asked him (at 92:50 and following) whether we were making progress on solving the problem hawalas create for counterterrorism efforts. Here’s my transcription of Glaser’s response:

Daniel Glaser: The reason hawala and other forms of informal remittances and informal money services exist is because there’s large communities around the world that don’t have access to formal financial services or affordable financial services. So the long-term quote-unquote solution to hawala is a generational one and it is about building an international financial system that everybody around the world has access to. Now, since that’s a long-term solution, we need to address the problem in a shorter term way as well.


The way we try to approach it beyond the long term effort to make financial services available to everybody is regulatory prong, enforcement, international standards, and general economic development.

While Glaser described a four-pronged approach in his written testimony (and described in more detail in the parts of his response that I’ve snipped), he said the ultimate solution would come when international financial services were available to everyone.

So the way to solve terrorism, then, is to make sure everyone banks at Jamie Dimon’s bank?

That’s an exaggeration, of course. And unless and until bankers get squeamish about the way the US government is accessing SWIFT, integrating everyone into the formal finance system would give counterterrror investigators transparency into terror financing. But given the state of the banking system–given how much more damage the international financial system has done to the world in the last decade than terrorism (leaving aside the effect of couter-terrorism and false counter-terrorism, like the Iraq War) it troubles me that a high ranking Treasury Department official believes one solution to terrorism is modern banking.

Now Glaser strikes me as an incredibly intelligent and sincere guy–coming from him this “generational solution” sounded like a completely sincere idea. So while this comment made my spidey sense tingle, it didn’t in the way it would have if, say, TurboTax Timmeh Geithner had said it.

Nevertheless, here are some issues it raises.

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