Once a month, a maid named Dammika hands a shopkeeper in Singapore's Little India about US$115, most of her monthly salary. The next morning, her father enters a jewelry store in central Sri Lanka and gets the money.
"I find it more convenient than banks and so much quicker," she said, speaking on condition her last name or employer, a Singapore-based banker, not be used. "Besides, they give me a better exchange rate."
Dammika may not know it, but the system she prefers to bank transfers is part of a global web of hidden transactions that may be the biggest obstacle yet to a US-led push to choke off terrorist funding. Known in India as "hawala" and in Pakistan as "hundi," it lacks a physical or electronic paper trail, making it almost impossible to crack.
"Illegal flows can be reduced," said Raja Chelliah, an economist at the Madras School of Economics in India. "But they are difficult to eliminate, as they finance drugs, gun-running and smuggling."
Pakistan Finance Minister Shaukat Aziz estimates that just US$1.6 billion of the US$6 billion that flows into his nation each year from individuals abroad comes through banks and other legitimate conduits. Karachi money-changers say the central bank sometimes buys US dollars from them to shore up its reserves.
Analysts say it's all but certain that bin Laden and his associates have taken advantage of a system used for years by Afghan drug smugglers. The hundi is prevalent anywhere with a large South Asian or Middle Eastern population, Barry Rider, a director at London's Institute of Advanced Legal Studies, told the British Broadcasting Corp.
Few intelligence organizations have cracked such a system, Rider said. "You could count the number of successful penetrations on the fingers of one hand." From Dubai in the United Arab Emirates to Birmingham in the UK and Toronto, Canada's largest city, the rules are simple. In Singapore, Dammika hands her broker S$200 (US$115), 80 percent of her monthly salary, and receives a code. To retrieve the amount in Sri Lankan rupees, her father need only reveal the code.
Authorities in Pakistan are trying to encourage legal transactions. Yet even the nation's central bank has taken advantage of money that currency traders have acquired illegally.
"When the State Bank needed to buy dollars to shore up the foreign exchange reserves, as it did in May and June, it purchased dollars from the money-changers," said one Islamabad currency trader, who gave his name as Mohammed Hussain.
That's not to say that every shady financial transaction in Asia is conducted without the involvement of banks. In Hong Kong, syndicates made up of crooked bankers and lawyers help transfer money through shell companies and banks, said Chu Yiu-kong, an assistant professor of criminology at Hong Kong University.
"The problem about cracking down on money-laundering in Asia is that there isn't any concept of clean or dirty money in this part of the world," he said.
Some of the blame belongs to governments that curb the free convertibility of money. In Singapore, currency traders freely sell both the Indian rupee and the Malaysian ringgit, though governments in both India and Malaysia don't permit their currencies to be traded overseas.
The Monetary Authority of Singapore requires them to report transactions of a value of US$10,000 or more. Because the city-state doesn't itself restrict free exchange, they carry on trading ringgit and rupees.
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