These informal cash networks — commonly known as hawalas — have long been used by Taliban commanders and other militants to move funds back and forth across the Afghan-Pakistani border, according to administration officials who helped prepare the legal case against the two institutions.
The two hawalas were identified as the Haji Khairullah Haji Sattar Money Exchange and the Roshan Money Exchange. Both were described as large networks that operate in Afghanistan and Pakistan, with most transactions occurring in border provinces.
Treasury Department documents allege that Afghan Taliban commanders maintained accounts in both networks and regularly withdrew thousands of dollars to pay off Taliban-backed “shadow” governors, buy weapons and pay fighters’ salaries.
The documents say much of the cash deposited in the accounts appears to have come from narcotics trafficking, a multibillion-dollar business in Afghanistan that helps finance the insurgency.
While U.S. officials in the past have targeted Afghan hawalas used by drug traffickers, the new sanctions are the first specifically aimed at disrupting the Taliban’s finances, said a senior administration official, who insisted on anonymity in discussing an ongoing investigation.
On Friday, U.N. officials added the names of the same two institutions and their principal backers to a list of groups officially associated with Taliban militancy, meaning they will be subject to international sanctions as well.
The U.S. and U.N. measures together are likely to severely restrict the network’s ability to conduct business with overseas banks or tap into international cash flows of legitimate hawalas, the senior official said.
“We have every reason to believe that the designation will be quite disruptive to their activities,” he said.
Hawalas exist throughout the Muslim world as a routine way of banking, particularly for immigrant workers and people too poor to have a bank account.
But they are also “an important cog in the terrorist financing machinery,” said the senior official. “Whether it’s al-Qaeda, the Taliban or other extremist groups, we are keenly aware that all of them have long made use of the informal sector.”
He asserted that the two networks targeted by sanctions had knowingly supplied cash to the Taliban for years.
“This is not an instance where an otherwise unwitting financial conduit is being used by bad actors,” he said. “These guys have set up shop in part to support the Taliban.”