Risks, Mitigation and Options in Syria REPORT FOR PARTICIPANTS CHATHAM HOUSE WORKSHOP ISTANBUL 14-15 DECEMBER 2015 © BEECHWOOD INTERNATIONAL LTD This document was produced by Beechwood International Ltd. The Chatham House Rule was invoked at the start of the meeting to encourage openness and the sharing of information without subsequent attribution. The sources quoted herein have given their permission. When empires ruled the world … In 330 AD Constantine founded the new capital of the Roman Empire (later to become the Byzantine Empire) on the site of the ancient Greek city Byzantium, which he renamed Constantinople. In the 12th century, it was the largest and wealthiest European city, and formed a vital intercontinental node on the Silk Road, connecting east and west. Indian, Chinese, Genoese, Venetian and Russian merchants traded gold, amber, silks, caviar, fish, honey, leather goods and wax. With the help of organised guilds the economy was strictly managed, aiming to keep supply and demand in balance. Factories and workshops, import and export, wages and tariffs were all controlled by the state; this included the prevention of exports that posed a threat in the hands of enemies (such as gold, salt, Greek fire and iron for making weapons, and timber used for shipbuilding). But the attribute that made the city so desirable was also its nemesis. Over hundreds of years Persians, Arabs, nomadic peoples, and Crusaders attacked Constantinople. In 1453, it fell to Sultan Mehmed II who made it the capital of the Ottoman Empire, and named it Istanbul. This added impetus for explorers to seek alternative trade routes by sea and eventually change the shape of global trade. Since 1923 and the foundation of the Turkish Republic, Istanbul remains the industrial, cultural and trade centre of the Anatolian peninsula – and with around 17 million inhabitants, one of the most populous cities in the world. Since 2011, the number of displaced Syrians in the city has reached 330,000 in Istanbul alone. Hidden from view is the extensive smuggling infrastructure that facilitates the movement of people into Europe. © BEECHWOOD INTERNATIONAL LTD An intensive and interactive session for aid practitioners, technical experts, analysts and donors from different countries and functions who are striving to increase and improve support to vulnerable Syrians. Implementing a recommendation of the technical assessment of Humanitarian Use of Hawala for Cross-Border Cash Flows into Syria by Beechwood International © BEECHWOOD INTERNATIONAL LTD 1 Share lessons and ideas related to Cash Transfer Programming (CTP) in the Syria crisis so that the humanitarian response reaches more vulnerable people in a timely and safe way. The ultimate focus is on finding optimal methods of cash support to those who are displaced or trapped inside Syria. © BEECHWOOD INTERNATIONAL LTD 2 Hawala is able to function in the context of a war economy, so is part of both the solution and the problem in Syria as the scale and speed of aid is escalated. The international community faces critical strategic choices as the country experiences today’s biggest humanitarian crisis and fuels an unprecedented global terrorist threat. Since the uprisings of 2011, the United Nations recognises 12.2 million Syrians as in need of humanitarian assistance, including 7.6 million IDPs, more than 5.6 million children, and an estimated 4.8 million people in ‘hard-to-reach’ areas (UNOCHA May 2015). In the absence of a fully functioning banking system, hawala has been proving to be critical to the aid effort in all parts of Syria. A key challenge is how to facilitate common understanding and agreement amongst all the key actors around what enhanced due diligence (EDD) looks like of a system that is largely unregulated by formal authorities, and exposed directly and indirectly to money laundering and terrorism finance (ML/TF) activity. “An immediate crisis creates a surge in financial transactions (remittances and aid) to meet the humanitarian need, causing a reversion to cash carrying or other informal means to transfer money. In a war situation, funds in support of parties to the conflict and sanctioned entities can be mixed in the same corridor with transfers that have a humanitarian purpose. The environment also tends to be characterised by constant change as a country or society reacts to the crisis. In the minds of banks and donors, these factors make such contexts fall into the category of ‘high risk’, thus requiring an ‘enhanced’ level of due diligence.” ‘Hawala and the War Economy in Syria’ Beechwood International 2015 (unpublished) © BEECHWOOD INTERNATIONAL LTD 3 50 people attended the workshop, representing different functions and locations. © BEECHWOOD INTERNATIONAL LTD They included 11 Syrians involved in the support from neighbouring countries. 4 Participants were asked to focus on the current questions being faced by aid providers in Syria, to develop a shared understanding of the major risks, and distil the basis of an action plan and key strategic choices that must be addressed by decision-makers. Their conversation was guided by various concepts and technical inputs, facilitated by experienced practitioners, and enabled through the use of three collaborative tools. The ‘journey metaphor’ was used to structure the meeting around the ‘coordinates’ of where we are and want to be, and the priorities to be addressed along the way. © BEECHWOOD INTERNATIONAL LTD To maximise productivity and model a dynamic organisation, the agenda alternated between plenary and small group discussions. Tables were allocated priority areas – (1) understanding the context, (2) targeting, (3) delivery mechanism, (4) implementation and monitoring. Participants were encouraged to move from table to table to ensure they fully contributed at all times. We have categorised and edited approximately 500 inputs captured on the tables, directly and anonymously via the netbooks. To reflect the overall sense of the meeting and key findings, these are integrated into the distilled outputs below. 5 Making the most of face-to-face time The TEAMWIN Collaborator, netbooks driven by an innovative software program, enabled a fast, collaborative, creative and disciplined approach to guiding and recording a conversation. Anonymous inputs are generated and distilled to an actionable level in real time. A number of parallel conversations were progressively reported back, rolled into one, and categorised offline. Balancing trade-offs in decision-making The TEAMWIN Decision-Navigator, a web-based tool designed for aid workers confronting difficult dilemmas at the coalface, was used to frame several current challenges. This approach to decision-making fosters greater discipline, collaboration, accountability and transparency in navigating today's volatile environment – again, in real time. Identifying the essential elements of effective collaboration The TEAMWIN Mat Simulation provided an energising experiential exercise for people to discover practical, fresh insights into the risks at hand, and take a ‘test drive’ to identify the elements and outcomes of true partnership – between beneficiaries and NGOs, and NGOs and donors. They then translated the experience into the real world by brainstorming the deliverables each party requires of the other to resolve difficult dilemmas and optimise Value for Money in Syrian aid programmes. © BEECHWOOD INTERNATIONAL LTD 6 The following six pages provide a synopsis of the participants’ collective view. THE LOGIC FLOW SETTING THE SCENE UNDERSTANDING CONTEXT TARGETING KYC/KYS DELIVERY MECHANISM IMPLEMENTING MONITORING Participants' objectives Here & There Enhanced due diligence Recent payments* Collaboration test-drive Lessons learned Walls Central processor? Options Resolving dilemmas *Password-protected document available to participants only on request due to operational sensitivities © BEECHWOOD INTERNATIONAL LTD 7 Dilemmas were compared with those of a recent workshop involving banks and their corporate clients with global supply chains vulnerable to financial crime and human rights violations. The results are remarkably parallel, indicating the potential value of collaborating with the private sector to devise complementary strategies. © BEECHWOOD INTERNATIONAL LTD 8 Beneficiary need and modality  Costs - value - a better understanding on the value for money argument  How to reconcile what is distributed (project requirements) with what has been used/spent (beneficiaries’ spending patterns) – i.e. they may not cash cheques and spend money according to project cycles for several months  Understanding of household and community economy, as it informs targeting and effectiveness of programming  UNRWA: how is the cash amount calculated? In coordination with GoS?  What good practice can we learn from cash programming, and bring into in-kind programming when cash is not possible?  What is the most feasible cash-based transfer modality, and how to you determine that contextually? Delivery mechanism  Access to hawalas... who and where are they?  Accountability to beneficiaries: what are their preferences regarding modalities of transfer?  Contact with hawaladars - what steps for initial outreach to them? Work through local partners or? Is there a way to be more strategic about approach or targeting who we work with?  Credibility  Gender - what is the impact of providing unconditional / unrestricted cash?  How are the currency conversions effected in cash transfers?  How can beneficiaries verify that they have officially received the money?  How do we build accountability mechanisms into work with unofficial hawala partners?  How to balance the concerns of the host government re: cash transfers with need to maintain confidentiality of our beneficiaries  Liquidity of MSBs  Management of physical cash in the field, best practices to mitigate fiduciary risk as well as the risk to lives of the finance officers in the field  Security of beneficiaries: At the very bottom end of the chain, what is the access of different actor to beneficiaries, and what impact would that have on operations/beneficiaries?  Security protocols for distributions using the Hawala, especially in highly insecure areas  Speed of delivery  UNRWA: what are the protection/security considerations for beneficiaries? © BEECHWOOD INTERNATIONAL LTD    Verify that cash has been delivered to beneficiaries What are the delivery mechanisms? Vetting? What different delivery mechanism and scale currently in use Donors/govt  What is the donors' risk appetite? Is it possible to arrive at a common risk appetite?  Donors' view on supporting the hawala system to be more structured and regulated  Can donors help us with legal issues in neighbouring countries?  How can the Turkish government help NGOs to facilitate transfers while minimizing fiduciary and political risk? Coordination  What are the steps needed for a unified cash based umbrella  Need to know which agencies engaged in cash system are  What due diligence is in use across all organisations active with CTP?  Commonality in understanding how cash is used by different actors (means + vs ends)  How we can better coordinate - how we can advocate for appropriate coordination around cash programming within existing coordination structures  What are the steps needed toward a common/compatible cash response  Understanding overall amount of expected programs by area Financial services  Functionality of financial services in Syria  How are bank transfers still carried out in spite of international sanctions on the Syrian banking system?  How could we establish a formal agency inside Syria so that people can access money safely and efficiently in cooperation with local authorities?  How to deal with the volatile exchange rate (SYP, USD)  Mapping of all hawalas agents in certain areas. Sometimes there are few options, few hawalas willing to go to dangerous areas  Physical movement of values (cash or voucher) from neighbouring countries to Syria  Situation of the banking system - providers/delivery mechanisms  UNRWA: what financial infrastructure is being used?  What sort of documents are used to KYC? 9 Geographical variation  Geographical differences; urban/ rural, camp/ host comms,  How do we set up compatible cash assistance to ensure geographical mobility? Markets & supply chain  Do we need to support markets/local traders pro-actively?  Ensuring adequate knowledge of markets before adopting CTP  Further to market understanding: understanding supply chains. At the local level. Interconnectivity between markets  How do we calculate needs in changing markets and dynamic conflict?  How markets are working: which ones are lagging, disruptions etc  How people use EMMA (looks at cash and how markets respond post/during crisis)  Impact of CTP on markets, prices, in besieged zones  Markets - if markets are functioning - people cannot meet their needs if the market is not functioning  More about any results about the war capacity (war economy)  Supply chains – e.g. from Turkey to Syria – where the interactions are, local to regional. So we can be aware of how due diligence changes based on volume  What are the specific requirements / modalities of each sector - recognising that each sector has different markets / commodity availability / price sensitivity / availability etc?  WoS markets understanding © BEECHWOOD INTERNATIONAL LTD Nature of risk  Better understand the risks - as far as delivery is concerned, fraud/corruption  How can you show me that everything is being done to prevent funds ending up in the wrong hands? One bad news story does more harm than 10 good news stories doing good  How cash being transferred/used can be adequately used without exacerbating illicit/terrorist activities, which might find its way into the formal banking/financial system.  The negative impact of the current Hawala activities - especially in the Syrian context; if any resource mobilization analysis has been conducted, we would like to know about it  What can we learn about risk mitigation from in-kind programming? Monitoring/impact  How can we really know whether intended sector (cluster) outcomes and impact are met?  Need to know monitor how cash has been used  Programmatic and financial monitoring Timeframe  What are the medium term options for cash delivery? 10 Aid workers, the military, politicians and business people currently grapple with many tough choices related to Syria, often with life and death consequences where extreme suffering abounds. To avoid paralysis through what can become polarised argument around entrenched positions, we must think creatively, collaboratively and courageously about resolving dilemmas and act collectively, drawing on the right expertise, experience and evidence. The overarching reality for aid workers in the Syrian context is a clash between humanitarian and political imperatives. Participants began a conversation about what an ‘ideal’ scenario could look like when apparently opposing forces like these are held together in a mutually reinforcing way, and how we can facilitate shared commitment when people’s lives are at stake. They began a process of identifying some of the necessary trade-offs to negotiate the inevitable compromise and conflict along the journey, and who has the will and influence to pave the way. “One of the greatest sources of discord and impediments to progress is a lack of mutual understanding about how we ourselves, and different groups, rate the relative significance of factors involved in making inevitable trade-offs. However, there are proven methodologies that can help unearth commonalities and differences in the ‘value’ and ‘cost’ we attribute to these decision drivers, resulting in objective, evidence-based solutions.” John Thompson, Co-founder Beechwood International © BEECHWOOD INTERNATIONAL LTD 11 Planning the delivery of tangible humanitarian aid is necessarily unique to each team of aid workers because it must be grounded in the specific local context. However, for coherence and hence value for money, it must also reflect a wider strategic perspective, comprising three dimensions:  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;  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  the timeframe – whether the intended action or decision is primarily impacting the short-, mediumor long term needs of a population. Model from Beechwood technical report According to 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.” © BEECHWOOD INTERNATIONAL LTD 12 Strategic-level input: donor dialogue  Beechwood/Chatham House to share any action plan re presentation of report (follow up to this meeting) to donors/relevant actors  Outcome of this workshop (and the Beechwood report) need to be communicated by donors and INGOs to the top decision makers to make a case for CTP. Also, a due diligence assessment framework must be put into place while engaging in discussions between financial institutions and other stakeholders to understand and learn how to reach a common understanding.  Elevate the technical/programmatic discussions to the strategic level by integrating cash working groups into coordination fora (inter-cluster, HCTs...)  Frank conversation brokered between policy makers and NGO community at high level about CTP  Have clearer guidance from donors about use of hawala  We know we can do this. We know we can do this at scale. Everyone wants it to happen. But no one wants to state (accurately) what is happening   Decision-making: aid modality and staffing  Bring finance staff into discussions about CTP  Do more analysis on cost comparison between in-kind commodities vs. paper voucher vs. e-voucher vs. direct cash distribution  WoS CBR-TWG structure developed with sub groups headed by leads with specific skill sets e.g. markets analysis, regulatory environment, technical programmatic coordination, financial/operational platform for cash transfers – ensure clear linkage into the wider humanitarian coordination structure  Coordination: analysis and action  Actor mapping at a high level of specificity, sensitivity aside, hosted by a partner whose mandate is information not biased programming  Commitment from OCHA and different access groups to build in political economy analysis  Consortium approach to take cash programming from pilots to scale and establish the necessary infrastructure (market analysis, monitoring tools) to allow for other actors to come in  Coordinate re specific tools, especially for hawala partnership in implementation  Coordination at the WoS level is important but should make sure that this does not result in agreement on the lowest common denominator or in hindering innovations/actions in the hubs that are more advanced on cash programming  Ensure that the conversations continue – this includes conversations about financial service distribution, as well as market analysis and economic analysis. © BEECHWOOD INTERNATIONAL LTD          Make sure the right people are at the right meetings Establish cash working groups in all of the WoS hubs and foster regular exchange. These should be accompanied by technical cash working group where finance staff come together to discuss supplier screening, private sector contracts, due diligence, etc. Establish/or if exists review the composition of a cash working group/committee so that each key stakeholders including IPs and if possible donors can regularly meet to discuss not only transfer of cash into Syria but to also to discuss ways of risk mitigation programmes, provide updates on the dynamic situations so that all agencies are on the same page and not exposed to any kind of new risks Explore how to overlay market information with 4Ws to see if the right modality is being used Initiate better coordination among implementers and policy makers to influence high level discussions as well as more holistic coordination Mainstream cash programming (the work of the WG) in the clusters work as a key strategy for their interventions NGOs collect better information on the ground on impact and use of cash programs, for our own and donor advocacy NGOs need to be more joined up at sharing good and bad experience Not all effective collaboration models are dependent on the response level coordination models; agencies should identify the limits of their sharing and then promote the right collaboration Political economy analysis must reach minimum the Humanitarian Liaison Group to then filter down Share the previous lessons from others activities in terms of adapting the most effective coping strategies re CTP activities ToR of CBR-TWG to be discussed and agreed – is this programmatic or does it need a wider mandate? Consider establishment of a financial sub-working group at HLG level for higher level information sharing and agreements on hawala partnerships (CBR and financial working group to coordinate on interfacing issues i.e. cash distribution to beneficiaries through hawala) Delivery mechanism: hawala/e-money  Address hawala legality issue in Turkey asap  All read the good practice guide and implement where practicable  Arrange a more formal dissemination plan of the hawala report  Debrief; we should tell the organization about the outcomes of this workshop, summarizing the outputs for them. Then we get the stakeholders and decision makers of the organization to spell out our needs clearly. Evaluate the benefits of adopting e-money. Do a proof of concept of e-money solution. 13    Develop a more digestible summary of the hawala report – maybe PPT, executive summary Expand the discussions about hawalas to be for whole of Syria (really ALL of Syria even IS controlled areas) with cleared procedures to help people in need there. We are forgetting about those people! Find a way to operationalize the recommendations from the relevant reports and especially the Beechwood report    Register Hawala agencies in order to sustain the effective way of moving money cross-border; have clear procedures and systems to ensure that all cash transferred to Syria in a safe way Revisit KYS process completed 2 years ago, and obtain additional info from suppliers in line with Annex. Needs to be agreed with other NGOs to ensure consistency Separate out perceived, actual and reputational risks RECOMMENDATIONS FROM BEECHWOOD TECHNICAL ASSESSMENT ☐ 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 a border town, for example, agencies should explore 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, including 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. 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 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 public advice prepared for them on behalf of legal experts. Some individual agencies have sought bespoke advice; which 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 financial 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). ☒ We recommend an urgent regional meeting with technical experts to share lessons and ideas in as open and interactive a way as possible. 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. © BEECHWOOD INTERNATIONAL LTD 14 The remainder of this report includes the transcript of netbook inputs to the TEAMWIN Collaborator, edited only for spelling, grammar and to avoid duplication. Look for the devil and the diamonds in the detail Generating, refining and prioritising ideas is a long and complex journey where each step must add value … sift 200-250 tons of rock to find one carat … average size diamond less than 0.1 carat in the rough © BEECHWOOD INTERNATIONAL LTD 15 Shared understanding             Contribute to exploring and sharing problems/issues faced with hawala Greater understanding of a topic that is relatively new to us Hawala is not that cost effective - agents require 16% far too much, so better understand how hawala agencies work Hawala system in Turkey illegal, so understand how the system functions and how agents could be moved towards legal status and how legal system could better accommodate it Hawalas do not have licences - is it hard to get the licenses or what is it that is stopping them from getting licences? Know more about the techniques and implementation Learn about some best practices from colleagues in other organizations Share knowledge, experience and learn from the past and good practices Understand breadth of CTP and other options available for money transfer Understand how the hawala systems are being used and functions Understand large-scale, within Syria and cross-border, transfers in highly restrictive regulatory environments Understand what other agencies are using Risks               Solutions         Better understand the challenges of implementation underlying humanitarian and development work in Syria Better understand the legal environment to enable increased transactions/programming to minimize risk while also gaining consensus on acceptable approaches/shared responsibility Better understand benefits and the risks imposed on Syrian people we are intending to assist - a bottom up understanding of this transfer modality Better understand risks of hawala Common challenges in monitoring process of delivering hawala payments Creating a common contextualised understanding of the risks and challenges of hawala supported cash programming Going beyond the risks of diversion Identifying risks related to programming and risks specifically related to cash transfers in Syria © BEECHWOOD INTERNATIONAL LTD Legal aspects relating money transfers into terrorist-held areas? Legal implications for practitioners? Look for a way of reducing risks by providing the best to beneficiaries Next steps towards cross cutting legal clarity Shared information - shared understanding of our approach to risks Understand what the risks are in terms of cash transfers into Syria      Aid (whether cash-based or non-cash) most efficiently and effectively without having funds being diverted to terrorist groups or sanctioned individual or entities Clear view to a systematic, secured and effective approach for transferring money to beneficiaries in Syria Contextualised package of tools and processes to operationalise CTP Different ways for CTP in Syria that are secured and compliant for the organizations and the beneficiaries? How to achieve sustainability in transfers, as opposed to one-off transactions Identify reliable agents to transfer the money through Identifying an E-system to register Hawalas, like a ledger that would help making it more legal Impact of Turkish authorities criminalising Hawala transfers into Syria and means to overcome this obstacle? Means to verify personnel receiving cash aid Options for currency? What are the considerations? Standard practice of due diligence - and standard idea of contracting with hawaladars Suitable response of cash programing in large scale sudden displacements What would an end to end payment ecosystem look like inside Syria? Action   Agreement on collective responsibility for action around the topic Everybody in the room does what they can to stop aid getting into the hands of terrorist organisations 16 WISDOM Distilled from a brainstorm looking back over past successes and challenges – the ‘wins and walls’ ANALYSIS ACCESS TRUST RESILIENCE SCALE PROGRAMMING VALUE FOR MONEY Judge when we have enough analysis to act. Recognise the importance of harmonising engagement with local authorities. Understand how to engage with all the stakeholder groups in a way that builds trust quickly. Take proper account of degree of resilience of each market. Balance short term (‘relief/coping’) vs long term (‘resilience-building’) and manage staffing (recruitment, retention, workload) when scaling up. Design to optimise the mix of modalities including money (CTP is a modality, not a program) against place and time. Agree what we mean by value and cost and importance of coherence. MYTH-BUSTING Acknowledge the current bias in perceived higher risk of CTP, despite evidence of successful implementation, and that there are practical ways to engage more safely with informal value transfer systems like hawala. RISK Agree how to identify risk and what ‘acceptable’ looks like. A lot of the risks described are related to good programming and touch on the core responsibilities of agencies. This underlines the need for sound monitoring systems and consideration of confidentiality issues before outsourcing to a third party. © BEECHWOOD INTERNATIONAL LTD 17 WINS WALLS Access  Cash grants in rapid response – accessing remote areas  Humanitarian managers are getting better at remote programming: greater understanding of constraints and how we moderate expectations  In Jordan, using cash as an entry point to access – otherwise difficult to access target populations; tying in protection, referral services, information dissemination, health services etc Access  Access to and ability to serve people in all areas of Syria – cash programs face big difficulties in hard to reach, besieged and IS controlled areas  Definition of 'hard to reach' is itself a wall – these areas still have functioning markets, although many obstacles exist to getting assistance in. If an area were truly besieged, there would be nothing to buy and cash would be burned for fuel  In besieged areas cash transfers don't work because of the shortage of supply of commodities. Also, putting cash into these areas risks feeding inflation, by enabling traffickers to push up prices  Hard to reach and besieged areas; though using e-cards could overcome it (but then again, monitoring must follow)  We only work in non-GOS and non-ISIS controlled areas; have to stop work in certain areas when control changes Legal/regulatory  "Local authorities" inside Syria are accepting legal frameworks that are imposed on NGOs  Regulatory/licencing framework developed for hawala in Afghanistan, UAE Legal/regulatory  In-bound bank transfers to Turkey labelled "Syria" often do not go through  Difficulties in moving physical value across the borders  Paucity of options for modalities of doing cash in Syria (e.g. not possible to do banking, mobile money, etc), and the fact that our only options are the least optimal ones and most uncertain in terms of legal, fiduciary risks  Basic problem for CTP from Turkey is that hawala is illegal and there is a cap of EUR10,000 on taking cash cross-border  Lack of clear communication from governments regarding the laws – e.g. if you take cash from a Turkish bank, it has to be accounted for as being spent within Turkey. Turkish Govt now cracking down on this  Individual responsibility to comply; perceived risk of regulatory sanctions inhibits innovation  Inflexibility of the banking system. And banks' unwillingness to cooperate with Hawala systems. (Low risk appetite)  Insecurity of legal context, no authorities, no banking system  Laws and sanctions pushing CTP into informal systems....schizophrenic nature of USG w hawalas  Legal implications not clear and formal authorities are not helping  Prosecution regarding all parties involved (Turkish authorities regarding organisations and providers, and armed actors regarding beneficiaries).  Turkish and Iraq government arresting employees of hawala offices © BEECHWOOD INTERNATIONAL LTD 18 Neutrality  In Somalia, the farther you are away from politicians, and the closer you get to people working on the ground, the appetite to undertake risky activities grows Political barriers  In GOS-controlled areas it is permissible to use vouchers, but cash-based programmes are not allowed  Cash transfers are a taboo issue  Donor comfort with providing inputs instead of cash  Donors want to track where people are spending money so unconditional cash transfers are a tough sell in capitals  Government is a wall – secrecy comes from working in a very sensitive country  Gulf donors need to strengthen their institutional framework to ensure that aid is reaching the people that needed it.  Need better internal and cross donor harmonisation and practical application of appetite, expectations, tools and policies around cash programming and to have these communicated to partners  Syria response under intense scrutiny (more so than other responses) Donors  Flexibility of Gulf donors in terms of aid supply (cash and non-cash) is helping NGOs in Turkey, Lebanon and Jordan; it goes faster to people on the ground in Syria who need it  Level attention rising for cash contributions among Western donors  In Afghanistan, the World Bank multi-donor funded National Solidarity Programme (NSP) has been able to reach large number of communities through hawala (when banks unavailable) with strong safeguards and risk mitigation  In Somalia, while there an official policy of "zero tolerance", there was an acceptance of not all the money will go to the intended recipients, with some being diverted to criminal/terrorist groups Donors  Donors asking for information that is extremely difficult to access  Donors can push cash in principle, then "get in the way" in practice. Similarly, NGO head offices can send mixed messages.  Lack of clarity from donors on procedures (requirements, due diligence, counterterrorism, etc), acceptable risk  No donor consensus on whether the priority is value for money versus the positive externalities that come from (more expensive) cash assistance  Perceived risk of CTP remains high and keeps the focus on simple theft and fraud and away from the larger and more likely sources of "harm"  Unclear guidelines on what donors actually need in terms of auditing papers (what are the minimum requirements?)  We keep running successful pilots, and we keep gathering information about the strength of markets and the effectiveness of CTP... But the wall is that implementing organizations are still asked to gather more information and run additional pilots Value for Money/cost  Evidence of cost effectiveness is context specific and strong.  Demonstrated possibility to do CTP at scale, and across different sectors (food, agriculture, shelter, NFI, rapid response, WASH, etc) Value for Money/cost  Average additional expenditure on CTP is 40%. Usually more expensive in government-controlled areas because of taxation, etc.  Cash is more expensive in some sectors like food distribution. You're reliant on the market, which doesn't necessarily benefit from economies of scale. It's harder to justify paying almost double to use cash modality and buy local rather than in-kind for a similar immediate outcome (feeding somebody)  Cost-effectiveness; high commission (16% Iraq) reported on some transfers  Increased cost comes not only from commission but also because local market costs are significantly higher (again, no economies of scale)  NGOs eat the commission costs because they aren't specifically mentioned as approved costs in grants © BEECHWOOD INTERNATIONAL LTD 19 Context/market analysis  Ability to understand seasonal challenges and adapt to these  Better understanding of the newly established hawala systems in Syria within different stakeholders is being built by experience and helping the cash programs  Food Security price monitoring system (WFP, CBR, other partners)  International community much better at market assessment (leading/lagging mkts) EMMA  The hawala study itself, for clarifying the issues  We have learned in Syria how to operate in middle-income environment  Markets are strong across opposition areas in northern Syria with low delays in restocking time Context/market analysis  All of the knowns from pre-crisis voucher operations in Syria went away with the start of war. Financial system collapsed, phones don't work. Syrians on the ground were used to having technology to help them do their work, then went back 30-40 years and had to do everything on paper  Conflict, and areas of control. Ever-changing conflict  Coordinating varies with regard to geographic areas and different clusters. And while talks could be coordinated, implementation sometimes isn't  Difficulty to identify changes in context, and also how those changes affect beneficiaries, not just aid agencies  Do we have credibility/core competence to examine supply chains in detail?  Fluidity of context, in terms of movement of people, markets, uncertainty about legal environment, on both sides of the border  Identities of players in the system.  Lack of "big picture" knowledge - when we transfer to a beneficiary via hawala, what else happens to the money? Where does our role of not funding terrorism end?  Lack of connection between the different hawalas used in the different zones – question to clarify: do hawalas in southern Syria have connections in north?  Lack of information, and what information do we need?  Vetting of the whole supply chain actually  How do you define whether a market is functioning – across different sectors, there are different needs and vendors. Availability of pharmaceuticals will be very different from food from fertilizer. Difficulty of planning by sector  Risk of markets unable to absorb the money Trust/FSP engagement  Engage local traders (market stakeholders as partners rather than just service providers)  Identified and built good relationships with multiple Hawala providers and receiving better quality transfers in return.  Engagement with private sector companies showed that they can provide excellent services to give us transparency regarding cash payments  Establishing relationships of trust facilitating CTP  Feedback from Hawala providers on undelivered funds, and being able to retrieve them  Questions about credibility of hawala dealers resolved by putting in place more safeguards (e.g. will only pay upon confirmation of receipt) Trust/FSP engagement  Because hawalas seem to work in a gray area of finance, our options in Iraq are pay in advance and trust the relationship with the provider or pay after and not know where the money comes from. When the primary hawala used came into trouble with the law, much of the INGO community was left without a transfer agent until new ones could be identified and vetted. (this was more of a planning problem, and it should have been addressed prior to the incident) Not all hawalas will arrange their own distribution point, so while we don't have to move the money, we are responsible for the full logistical operation for the distribution.  Trust, particularly on the ground - distributing cash, in shops etc.  Communication barrier - partners can be unwilling to share details, experiences, data, etc  Lebanon-based partners unable to share the same of details and information (confidentiality issues on CTP)  Low awareness from local Syrian populations and stakeholders about the cash programs sometimes do harm to the community  Language barriers with Hawalas, and lack of cooperation re documents © BEECHWOOD INTERNATIONAL LTD 20 Impact/Implementation Impact/Implementation Successful pilots/programmes Targeting                  Beneficiary preference is strong for CTP Cash distribution in Northern Iraq, giving checks/cash Cash vouchers for livestock and agriculture inputs (seeds, fertilizers) Disbursed $2.5m inside Syria with zero loss Disbursed 2.0m with minimal loss Diverse methods used to date HRP document notes a positive trend in a chapter on multipurpose cash dispersal In Iraq, hawalas have been fast and efficient. They've been respectful of beneficiaries, and by working on a contract-by-contract basis, we've had relative flexibility in need and use. We outsource risk to them, which relieves us of having to do direct distributions and move with large sums of money. The hawalas used have been local, and so they know the context and the people better than banks or electronic transfer entities. This also keeps the money relatively local, which I consider to be a good thing. Iraq – distribution in USD Multi-purpose cash as a means of determining how people prioritise their needs. Following evaluation, data from cash use helped us to re-evaluate our own targeting and prioritisation, identify information gaps and issues to address via advocacy Multi-purpose cash, availability of partners is a big win in Northern Iraq Paper vouchers methodology is quite strong, minimal fraud reporting Pilots of e-vouchers/e-cash in Syria (Hassakeh, Red Rose) Several NGOs began CTP around 2013, particularly in Aleppo, Idleb, Raqqa and Hassakeh – with a variety of modalities, including Vouchers, CFW Strong experiences in CTP in remote management using hawala in Somalia, Afghanistan. Plenty of impact evaluations report in these contexts, including the impact on gender Took a lot of lessons from Syria operation to Ukraine: learning from in-kind inside Syria and cash/voucher for refugees. Now in Ukraine we run multiple types (in-kind, cash) of programs, sometimes depending on time of year, sometimes to the same beneficiary Voucher programming; restricted, unrestricted New technology    Ability to exploit state of the art technologies for building e-Money and KYC/M/S system Access to established e-money systems; expertise to design an operational system that can be transparent, and ensures that integrity of cash transactions is fully preserved Pilots of the e-voucher systems: they were considered a successful pilot in the Syria context, despite reliance on internet connection © BEECHWOOD INTERNATIONAL LTD        Effort and weight of a program is put on the modality of cash; don't do enough research on whether program is targeted properly. For example, we lack rigour on whom we're actually approaching, don't go beyond sub-district Focus of conversation is on difficulties / walls / bottlenecks for aid agencies, but it's missing this for beneficiaries In Somalia, CTP was the best thing to get to the people, but the challenge was to get it to the right people Lebanon: Newcomer programme (designed to include vulnerable people who recently arrived and were falling outside the assistance system) was shut down because of fraud Responding to access to money challenges on the beneficiaries side (e.g. disabled/elderly receiving money through an intermediary - how to ensure this takes place and the process is accountable) Targeting, harder to determine how we get cash to the right people Vetting of beneficiaries? Contingency   Lack of time and funding for contingency planning. This would help anticipate challenges and improve rapid response Tracking people when they move Capacity    Capacity issue, both in terms of building staff capacity and retaining strong staff Lack of cash management systems in communities (Afghanistan) Hard to find hawala agencies with robust financial controls Liquidity/currency     Cash liquidity issues: 1) ceiling on the amount of funds to transfer per month, 2) capacity of partners for scaling up Currency issues – it's a challenge because of inflation and markets Liquidity at all levels: markets, money providers inside Syria Liquidity in the bank; this is a big challenge – delays implementation New technology    E-voucher systems in place remain staff intensive Low level of understanding of how to apply new tech to Syrian context Not resolving the issue of access to money across the border area. For beneficiaries it would be good to have e-cards etc working on both sides of the border (but would a regional card encourage displacement? These issues need urgent discussion) 21 Security  Low occurrences of security incidents in implementation of cash or voucher responses Security     Coherence              Cash-Based Response Technical Working Group (Turkey hub) established early on; has seen sustained commitment and participation Common standards – e.g. minimum expenditure basket Connecting multiple Hawala providers to form a larger network that could provide cash most large urban settlements across Syria. Coordination and collaborating with different stakeholders Countless positive pilots across multiple organisations in Northern Syria demonstrating consistency and similarity in program design Good information-sharing in food security sector, whether cash or voucher. 7-8% of total monthly response is by cash or voucher Growing commitment to support Syrian partners to build CTP expertise and capacity Joint market monitoring from Turkey hub, reaching out to other hubs as well Lebanon: Rationalising the FSP platform in the second phase of the cash response; went from using all methods and companies to an account with one provider which allowed sub-accounts. This increased reach, improved timeliness, and cost through a coordinated approach' More coordination: North Syria response has already a cash-based working group, which has been able to share their experience with Jordan Organizations' commitment to build CTP expertise Somalia 2011: few agencies covering the country, standardized tools & approaches allowed comparison across areas, but flexibility also allowed for contextualization by area The understanding that we have to do something about the regulatory obstacles, in particular in Turkey. NGOs working collectively will be able to make a stronger case to Turkish government on allowing hawala within proper regulatory framework Fragmentation            Coordination through a sectoral approach – CTP does not have a well-established route to contribute to other sectoral plans Decision to use cash is agency-specific; no established norms on when to begin discussing cash support Lack of communication between different hawala providers Lack of connection between the different teams/people from different cross border entry points Lack of official agreements between partners on cash transfer policies, and a viewpoint on how the cash systems work Need for regulatory improvement/overhaul/ coordination of the entire system No local authority inside Syria to organise cash agents Pilots can't be scaled up because the success will vary based on area and who precisely you're working with. Still struggling with the WoS cash coordination response (holistic response as opposed to hub/geographical area-based cash response) Some reluctance to share information (who, what, where, when etc). Sometimes lack of knowledge about who is working where. Potential inefficiencies. But coordination is improving in Turkey, it's good in Lebanon, potentially weaker in Syria Working with new money-lenders makes us reluctant to work in new areas because there are no standardised risk profiles among multiple NGOs Monitoring and controls        © BEECHWOOD INTERNATIONAL LTD Logistical requirements for CTP highly vulnerable to security changes (vouchers) Data security (how do we ensure data security and how do we mitigate concerns about personal information without being physically present) Insecurity of beneficiaries/situation of the community. Risk to loss of cash Trust in-kind more than cash; latter brings problems with security, targeting, DD Due diligence delaying CTP Engagement with armed groups. Hawala agents within Syria may be paying protection money to armed groups, and/or performing cash transfers for them. Questionable whether KYC is adequate to deal with this problem Fraud in documentation, regarding beneficiaries, agents, and middlemen. In Somalia, a proportion of the funds that Save the Children went to the people. In the context of billions of pounds, 1% to criminal/terrorist activities is still far too much Lack of sense checking the perceived and actual risks of cash based programming and the differentiated risk between in kind and cash programme, especially around diversion, monetisation and unintended use Northern Syria: emphasis on monitoring makes it impossible to engage on the ground Risk of diversion of cash to armed actors in way that incentivizes bad behaviour; for instance, what does infusion of cash mean when armed groups/security forces 22  control access to what it can purchase, especially in sieges? Risk of 'taxation' post distribution (e.g. check points, etc.) Scale         © BEECHWOOD INTERNATIONAL LTD Capacity of the system to handle large amounts of cash Cash is not a panacea. Scale can overwhelm effectiveness and quality if cash comes to be viewed too broadly as solution Don't forget challenges in terms of staffing (Recruitment of Syrian staff, retain them, workload on operations staff etc...) when talking about scaling up. More money is not always the solution In places where we were starting to look at moving towards cash modality, things changed on the ground with conflict and had to stop this process. In some areas we had graduated up to different forms of modalities, but had to then go back to basic relief. The danger when this happens is that we lose the more strategic level/longerterm timeframe of decision-making about support to the Syrian people Lack of access to infrastructure (basically everything regarding electricity, internet...etc.) One off cash assistance programs don't work. We need more consistent response (ecard could overcome this) Scaling up e-vouchers (did 2 month pilot for program based in Turkey) brings more risk from increased visibility Unintended consequences, especially if scaling-up is rushed 23 “I suppose it has become cliché to emphasise the need for better communication among humanitarian actors, but it's hard to avoid it as a key takeaway. On this issue set as in so much else, the value of direct coordination and note-sharing, across both organizational and geographic lines, is clear. Without it, key lessons-learned are missed and negotiation leverage squandered. During our discussions, I was struck both by how little colleagues in separate organizations may know about each other’s activities in shared or similar environments, and also by how willing they are to exchange notes when given the chance to do so face-to-face in a conducive setting.” Noah Bonsey, Senior Analyst – Syria, International Crisis Group © BEECHWOOD INTERNATIONAL LTD 24 HERE: Characterise where we are, and the compelling need to shift gears                 Better coordination instead of individual contribution on a project/prog level Broad intention and willingness to address issues surrounding the Syrians Cash discussion is pushing people to think cross-sector. Acting as an incentive. Though agree that it side-tracks from other discussions. Data sharing at a very low level so far, it becomes better after the activation of the clusters roles, still need more coordination Disconnect between academia/analysts - entire burden on NGO community Real gap between what we feel we need to know to design a programme - e.g. in Iraq, the price structure of kerosene - and the bigger picture painted by analysts looking at the political economy. No one seems to own the disconnection - where do we look to bridge the gap? Role of CaLP? Expanding market analysis to cover more areas, systematically Facing access challenges in assessing markets Inconsistent donor decisions on whether they will fund organizations that work through whole of Syria approach or not. Inconsistent/disparate approaches to market assessment of projects in different areas Increasingly better sharing – individual or organizational level and specific for certain projects or programs Issue: Knowing where to look, knowing a report has been released, and knowing across industry where information is coming from (e.g. Think tanks know when competitors release reports, but unaware of other sectors) Language is different Location - lack of shared understanding of where this information is shared Looking for information to drive programming - responsibility of academia and donors to help achieve this Meta-analysis of the last 6 months nearly ready                  More structured engagement with the private sector. Movement towards creating more coherent methods and timing of selecting shops/targeting No standardized approach to follow which makes the comparison much difficult, there is no SOP for the market assessment till now People are hoping cash will be the catalyst to have an inter-sectoral discussion. But not might be the right catalyst because it's just a modality. Problem with NGOs not collaborating enough in a certain geographical area Reality on the ground is disconnected, so need more conferences Right now we are in a sector-level analysis. Talking about generalizations. The foxes are minding the henhouse - the NGOs are doing the assessments. We need disinterested parties to collect unbiased information. It was noted that the UN agencies should not be considered unbiased. There is appetite - think tankers benefit hugely from on the ground info There is very little link between the macro and micro levels of information Trust - some info isn’t shared, but on the other hand it’s an opportunity Some NGOs want to share info but not have their name included Understanding how sectors approach each other is a long-term discussion. Using REACH market analysis, rolling out our own price monitoring, specifically to drive our own programming We are area-based, program-centric, and scattered. We continue to expect IPs to collect information for the greater good, which is not in their scope When can we agree that the information is actually quite strong? Acknowledging areas for improvement doesn't mean that we do not have enough information to get started (at scale) today World is difficult to penetrate THERE: Characterise where we want to be, and by when   Achieving better understanding of people's preference vis-a-vis cash, voucher or inkind, and integrating these preference into delivery systems Achieving economies of scale through larger transactions in which costs are reduced © BEECHWOOD INTERNATIONAL LTD   Legalisation of hawala, or at least some workable alternative legal mechanism of getting cash across the border Link with external bodies to get access to secondary information 25           Better financial data collection mechanisms, and capacity to collect data on the market conditions from a centralised institution to achieve a better view of the fluid context Checking in with analysts to combine information used for programming with contextual analysis to develop an understanding on potential unintended consequences/the big picture Cohesive, multiple hub discussions; not just individual hub discussions Coordination of geographic hubs to come from above – pushed by larger entity Engaging private sector Ensuring better monitoring of how hawala dealers operate – does money reach beneficiary? Established coordinating body to help the individual agents to run at least on a principle based if regulating cannot be an option in the near future due to intervention of govts Gathering data not only on prices of goods, but sourcing – goal is holistic approach that identifies vulnerabilities in supply chains of specific items Good information gathered by non-invested parties would also help limit the differences in understanding at the hub level; again, the WoS actors should not be considered unbiased parties Increasing confidence in the information we get back – data triangulation and verification            Maintain comparative element of market analysis Mapping economic geography of consumables – who is purchasing what, where? Need discussions around purpose: are we trying to support the wheat economy? Which questions are we trying to answer, what's the objective of the analysis? Need in-depth sector level data Next level of information gathering will lead to better accountability. Information gathered by non-NGOs would increase the standards People need to be funding this data collection Real time analysis of market analysis Scale up proportion of cash/voucher to 20% in some governorates along the Syrian border Should be able to overlay different kinds of info e.g. market analysis with security and 4W info, to get a more in-depth understanding? Specific funding for market analysis required Systematic, real-time analysis that could inform programming – we need the context analysis to be fed into one place, like the CCCM Turkey hub displacement tracking, which would make it easier to distil and then use the information. Information Management Units would be strained, so we need them to be resourced and for partners to have easy (but protected) access to such a system. This can be achieved through encryption WALLS: Identify the issues/obstacles or challenges that must be anticipated to reach the goal    LACK OF OVERALL STRATEGY INADEQUATE COORDINATION LOW UPTAKE OF EXISTING MATERIAL   Dispersion and lack of organizational coherence Huge amount of money invested in these organizations is a limitation. There is a tension between scale, innovation, risk, and accountability Implementing organisations do not have access to information on larger impacts on other supply chains. NGO-level can't penetrate market deep enough to have full and thorough understanding  © BEECHWOOD INTERNATIONAL LTD       Need for a proper place to fit cash coordination in the existing coordination structures at hub and WoS levels No clear overall plan to integrate various sector responses No integrated long-term sustainable projects. Most of the projects are geared towards short-term, emergency interventions. This means that needs will repeat themselves Number of actors are implementing outside humanitarian coordination system Syria policy centralised at donor capitals You can't communicate the nuances of these links in the media – people would be less forgiving given that it is Syria 26 “There is still a need to explore practical means to achieve a transition from humanitarian aid to effective development assistance. Much of the discussion and debate was angled towards humanitarian aid delivery, but I got the sense that many of the participants were keen to engage at a deeper level with Syrian communities and businesses. A starting point could be to explore relationships between Syrian businesses that have relocated in south-eastern Turkey and their financial partners, obviously including hawala agents, and examine how development agencies could support projects or programmes (e.g. vocational training) with a view to re-establishing the Syrian end of these businesses.” David Butter, Associate Fellow, Chatham House © BEECHWOOD INTERNATIONAL LTD 27               All the questions raised in the DNH matrix (of Beechwood report) are doable if it's at scale. If these were big projects it would make sense to do this Going through a more thorough DD list could be prohibitive in actually being able to implement assistance in good time By asking too many things from hawalas and pushing to make them more formal, we are killing the purpose of using them (fast, trusted by people, flexible, accessible to people) Some sort of hosted central list of the suppliers that organizations can draw on. This would rely on a lot of trust. Associated security threat to finding deep information about suppliers Can effective DD be achieved without using expensive, and not necessarily reliable, DD specialists? Consultant on humanitarian projects, but is it one off or longer term? Could a pooled DD process be operated entirely separately from the individual donors? Danger is you end up with a long list of organisations not to work with Define where the end point of gathering information is – if you keep going for a very long time, you will always end up at something unsavoury Donors push NGOs to carry out DD, but lack of funding for this Ensure confidentiality set up coded ID system for hawala operators Establish a platform designed to be safe means for information sharing Financial institutions have established in-house databases in which they collate, review and update EDD reports on individuals and companies. This needs substantial investment to bring into being and a link needs to be established between on-the-ground agents and other stakeholders to make the right decisions. Hence, financial professionals at these institutions (compliance department) can provide crucial help in conceptualising and making this idea concrete © BEECHWOOD INTERNATIONAL LTD               How to overcome the problem of hawala agents being reluctant to having confidential information shared around? In reality, we have few options other than the hawaladars inside Syria Legalization of the hawala system/providers would solve a lot of these problems. Most of the KYS should be done by governments Need an agreed set of minimum requirements from all donors Need checklist of responsibilities of an organisation when they go through a DD process – should standardisation be at Donor, UN, or NGO level? Online marketplace has been used in other contexts Only way to speed up this process would be to make it standard from all donors. The process would have to become normalized and legal. Perhaps more of a consulting effort between TT and NGOs, that way the information flow is constant Sharing information could put suppliers at risk with neighbour governments Similar problems with all kinds of assistance, including in-kind – problem with CTP is shared liquidity, information sharing, and tracking Standardised checklist could take away from nuance that applies to individual organisations Starting point: use political analysts and internal knowledge. Look at every level of the supply chain. Develop trust relations, ensure the people you hire have networks (do this responsibly) Utility is more in providing a common set of guidelines that everyone signs up to and prove to donors that they're being compliant to Why do we ask for all this info from hawala (corruption, money laundering, etc) and not formal banks? Inside Syria, they work for the government, serve government controlled areas, and are probably subjected to corruption, money diversion, etc as much, maybe more 28 “Bankers in the MENA region will explain that a major concern is the worry over “back-door banking” where, even if they don’t have existing business/relationships in the high-risk country, their branches/ATMs/etc will be used in the financing chain. Those are not just related to financial transactions with terrorist groups (ISIL, Nusra Front) but also on the regime side (in terms of breaching sanctions or abetting money laundering) where a lot of shady activities are taking place as part of the war economy. My impression from the workshop is that there is a lack of understanding (or misunderstanding) of the crucial role of conducting EDD on entities and individuals that are either suppliers or partners; the first step is to gain an understanding of the political economy context of Syria, especially for those operating on the ground (donors, INGO). This touches upon the core issue of using reliable and efficient hawaladars without causing more harm than good. The cases of two large companies mentioned were salient examples of the need to understand how working with them might enhance or undermine the efforts to scale and speed up delivery. Gaining the trust of the community in non-regime held areas would only take place if organisations operating there are not perceived to have links with regime officials or businessmen. Otherwise the sustainability of the operations (especially if cash is involved and data is collected) will be at risk.” Rashad al-Kattan, Senior Analyst, Aegis Advisory © BEECHWOOD INTERNATIONAL LTD 29 “If you are moving money into Syria, the reality is that you are using hawala” Operating model  Are hawaladars willing to distribute money to beneficiaries? How much scale can they handle from a security standpoint? We don't want field staff handling money  Beneficiaries take vouchers to a hawala agent for unconditional cash  Can also use hawala system as a letter of credit when paying suppliers  Do you want the beneficiaries to go to the dealer or through a partner?  Due to security, sometimes payments are delayed/postponed  Hawala agents would not do less than USD50k per transfer and not pay more than 5 beneficiaries, so have to appoint intermediaries  When hawala is your means of transfer; not necessarily program option  Hawaladars are entirely independent from formal Syrian banking system  Maintain security for local staff during payment runs  More than USD2.5m sent by one NGO. Monitoring by local staff  Preferred operating principle for hawala agent to distribute funds  Process is largely automated due to consistency, however it can change if say the beneficiary moves location  Project is only focused on dispersing cash and not what happens with it – we do want to know what happened with the cash, but it is only done with interviews  Sense of economies of scale  Supplier receives the goods first, and then agent is paid  Tamkeen project primarily supports good governance and basic services like health, education, infrastructure; distributes directly to supplier through hawala or sends money to finance field officers. Tamkeen committees (community) procure, Tamkeen programme pays  Very high redemption rate on vouchers  We only pay them when we receive notice from the beneficiary and the hawala dealer; we reimburse all vendors for voucher projects through hawala (northern Syria) by payment of hawala from Turkey Currency/exchange rate  Challenges with exchange rate, it’s changing all the time  Not coordinated if we should pay in USD or SYP  Regime held areas they only deal in SYP  Sometimes hawala faces problems to find dollars  Voucher value changes with the exchange rate, so we have to be super flexible and sometimes print new vouchers to adapt © BEECHWOOD INTERNATIONAL LTD    We agree the fixed exchange rate, and any conversion to SYP happens at the end point. The problem comes down to value, and how to report this. We are about to begin planned CTP for 120 families in southern Syria, via hawala in Jordan. There will be 4 pick-up points, arranged discretely. One big issue for us was exchange rate – project in USD, payment to hawala in JOD, Syrians to receive SYP. For now, have agreed to set fixed exchange rate on monthly basis We use the exchange rate of the day before Commission/fees  Less than 0.02%  0.2% to 1%, varies based on the targeted location the rate is between and for the besieged areas in Syria we don't do any transactions and the local institution/beneficiaries (sometimes local councils) collect the money in Gaziantep  0.3% to 0.5% in most places in north Syria  2% to 3%  4% for USD150-200k per week transferred to Syria  Up to 10% in besieged areas  Are commission rates being asked for fair prices for the hawaladars?  Depending on the area which money has to be transferred to, difficulties vary. For example, for Daraa we have only one transfer agent (hawala) but for Hassakeh and Idleb we have different options and then commission rates are reduced due to competition but with increased risk of security.  Depends on the kind of activity and the location to reach  Don’t have a strong understanding of the pricing scale and how they calculate it – very hard to verify it. Don’t know how much other organisations are being charged  Except for the besieged areas, cost of transferring money is cheap, fast  Our experience is that they are reliable, fast, cheap  We have to be careful not only to count cost of transfer; must account for cost to beneficiary – in other words, reconcile cost at market vs cost paid through supply of goods. One view is that items at market can be upwards of 40% more expensive than procuring at wholesale prices on behalf of beneficiaries. Therefore, paying 40% more is a high price to pay for supporting economic recovery when funds are so tight. Another view is that this is not necessarily the case because of daily price fluctuations that vary greatly by geographical area, and also on the item in question. Almost five years into the conflict, supporting local production seems important, otherwise dependency will simply endure or increase as aid scales up 30  Advantage to being Syrian – don't take internationals with me to hawala office. They would treat them differently, higher price ('foreigner tax') Geography  Based on the location of the hawala at the Last Mile, the risks are variable. For example, in a place like Al-Hassakeh, it's fine to have the appropriate documentation from the agency to prove the cost of the transfer because they don't have problems with asking about their registration/licencing documentation, IDs or any other necessary docs. This is not the same situation in transfers for Idleb or Aleppo  Beneficiaries living in IS areas sometimes ask for the money to be transferred to non IS-controlled areas and then the money is collected by them or a friend/family member  Challenge is getting money to neighbouring countries – Lebanon monitors everything over USD10k. So if money goes in they want to know where it goes afterwards  People in IS areas afraid of the source of funds being traced. To mitigate the risk, they go to the hawala office inside Syria and say 'I received x amount of money from x hawala office (no need to say from whom)'  Problems due to political issues on the ground in target areas in NW, not due to CTP  Problems in sending to regime-controlled areas and besieged (Ghouta) without interference from parties to the conflict  Through a good hawaladar, connected him to other countries in order to improve his network  We find that what the hawala transfer looks like (man in a shop, office, person in a cafe) varies greatly by country, time, network, amount Data protection, trust/integrity, and legal issues  How much information are we willing to give hawaladars?  Registration in regime-controlled areas requires hawaladars to give lots of documentation  Data protection issues with GoS registered hawala agents  GoS likely has degree of oversight over flows of money through Syria regardless of the area. Will likely allow so long as they get a cut  Can back track payments over many months in the event of a faulty payment/inconsistency  For third party pick up we take the phone numbers of all the people in the chain. Hawala office outside Syria, inside Syria, the beneficiary and the third party. In the event of a problem we call them all and determine the break in the chain. But it is a trust based operation. © BEECHWOOD INTERNATIONAL LTD                  Insight into hawala dealers: they are honest people (that is the most important aspect for them). Many hawala dealers are ex-jewellers – in Syria they are known for their honesty. There is a saying ‘if you need a witness, you're better off with a jeweller’ Met the hawala dealer in Gaziantep, did a light background check on his family. Very localised process, based on personal relationship No problems encountered in making the payment while using hawala and intermediaries Pushed/persuaded the trustworthy hawala dealer to expand his own networks across the country to ensure continued business Trust relationship vs simple risk transfer to local partner/agent? Has to be mutual trust between hawaladars and organisations Have to trust the field staff who verify that the money has reached the intended beneficiaries Issues with formal documentation, official receipts can't be provided about fees and ultimate payment received. Rely on trust and substitute documentation Sometimes hawala dealers unprofessional. In Beirut, we dealt with a hawala dealer who met us in a very public area (the street), where we transferred the cash and signed a paper. Such a process carries a lot of risks and left us feeling uncomfortable. That said, the money did reach the beneficiary Challenge is mapping out the route – takes a lot of time and trust to find the route for money to different end points and at different periods of time. The complexity and sensitivity of mapping the route has become even greater since cash controls have been imposed. Sharing information risks undermining the system – partly because of legal situation More risk from host government than Western government – local government more likely to crack down Handshake agreements from donors are not reflected in contract fine print – so can't feel fully assured Legal issues prohibit negotiation over hawala rates, particularly in Turkey Very challenging issues pertaining to data security and risk of detention Although it's flexible, cash can exacerbate the conflict Issues requiring formal ID to receive money in certain formal transfer situations – recipients may not be able to show formal ID for various reasons Two pages listing recent cash payments were shared and recorded in a separate password-protected document available only to participants on request. 31 Context  Suitability of e-money to the local context (for both beneficiaries and vendors), and sensitisation of stakeholders to understand the appropriateness and feasibility for all  Internet connectivity required  Use of satellite communication is common across all of Syria, with resources pooled – people contribute small payments to outlets that cover the monthly fee for the network; this allows for many possibilities for the e-money platforms to work  Smartphones are common, especially among merchants. Beneficiaries also have access to smartphones, and failing that, feature phones with rudimentary SMS capability can do the job  What is the currency preference? Capability  Some systems allow for real time monitoring of beneficiary spend  Compatibility of various systems to cope with mobility of population  How does it fit into a mixture of modalities for various purposes?  Is it more suited as an early recovery/service delivery activity with the necessary infrastructure support? Design/scope/control  How do we design a system that is transferable and compatible across the country under the variety of best and worst conditions? What are the ideal conditions and under which conditions can it not be achieved?  Do the regulations allow for the creation of a new, closed loop payments ecosystem e.g. where people get points in exchange of aid? Merchants would need to be guaranteed the ability to redeem points in favour of reputable ‘corporate’ © BEECHWOOD INTERNATIONAL LTD    suppliers outside Syria. Essentially a new currency pegged to dollar. Will such a service need to be ‘regulated’? What will the banks think about this? Does such a system ‘expose’ us in any way, and how do we protect ourselves from abuse by sanctioned entities? Arguments for/against both need to be validated and challenged through a feasibility study E-money set up can help with compliance as the point system allows for control If we want to set up something ambitious, we need longer term funding in order to make sure the upfront costs and the longer term benefits for beneficiaries can deliver value for money Example of e-money is something we don't do only short term and potentially not only to cover current humanitarian programmes Engagement/agility  How can it be rolled out to very small local traders to allow decentralisation?  Can the relationships with vendors be decentralised sufficiently to support beneficiaries where they are, to avoid current security risks of centralised distributive/collective programming?  How do we engage local traders with an e-money system?  How do we engage the private sector to see the business case?  How can we communicate to the private sector that there is both appetite and demand generation from the humanitarian response for innovations like this? Cost/collaboration/competence  Is the added value of the humanitarian community in providing upfront costs, and have the business sector take over the operational cost and humanitarians focus on generating the demand through targeting?  Do we have the appropriate core competence to support this? If it's in the domain of business, why has this solution not emerged yet? 32 Operating model  How do you define an LCC? Many different entities fall under its umbrella  Empower local community, as local actors working at every stage of implementation, accounts, finance, etc  Every 6 months there are elections, but a changeover comes with its problems. High turnover is problematic within LCCs  Some (one?) LCC is registered as an NGO in Turkey; makes it easier to deal with them; no serious changes since legislation was implemented  You could provide a commodity rather than cash to the LCC, which it can turn into a revenue generator/service provider (sometimes logistical challenges involved)  Local authorities deal with central authorities who receive cash  LCC have directorates, staff below that level  Damascus holding company issues building permits, etc – owned by the city, creates subsidiaries, but these can be owned privately (a way for loyalists to own a stake)  Realities on the ground – need quality people, LCCs and armed actors working together. People in LCCs have relations/networks with armed actors. Such a relationship is inevitable. Be mindful of reaction of local community when engaging with LCCs. Many leaders in the armed groups are originally not militants, they have a role to play in admin/local governance. Taxes in response to good services only.  Inconsistent fees: taxes, zakat, etc  Potentially maximising value for money Risk      Across LCCs, varying levels of capacity, transparency, ability to monitor spending and hold them to be accountable Armed groups seeking to influence/control LCCs Dealing with the interim govt came with a political risk Not an ideal situation, but there's no alternative Larger organisation might have greater issues with financial compliance © BEECHWOOD INTERNATIONAL LTD   Political risk – 'foreign entity/power' backing particular LCC – i.e. LCCs in Kurdish areas might be difficult to support as they strengthen the body We can’t fund LCC's directly; only projects. Question of risk Accountability/monitoring  Who do you hold LCCs accountable? Use CSOs to create mechanism? Not using implementing partners for monitoring as effectively as possible  Syrians don't trust electoral process, and there is a lack of belief among LCCs that they can govern on a larger level (due to lack of experience)  Instability within LCCs increased this year, though it's difficult to measure  Issue is not a lack of money; services are working, but is it thanks to this cash? Both cash and in kind support. Difficulty is measuring success. No idea of 'here' and 'there'; more focused on whether it has gone in  Trying to do some work at the provincial level to foster a culture of cooperation between LCCs  Value in keeping as many people engaged, but does this offset accountability for cash given?  We're not doing too well at measuring which LCCs govern well and which ones less well – a key question as we seek to empower LCCs to give them capacity for local governing  Benchmark from donor/NGO perspective as good administration within local authority is Daraya, also Ghouta (given extreme circumstances) Sustainability  How long can you commit to fund these programs?  Do you cause more damage if you can't sustain it?  Create shared admin between different LCCs/militant groups – institution akin to a bank  Local authorities need to demonstrate a plan for future Syria as IS has, which accounts to a large extent for their appeal 33        Cost; additional transfer fee – double commission rate Fewer vouchers, fewer shops for monitoring – faster process, less storage Wider geographic coverage – vendors closer to communities Rural location voucher exchange points Separation from hawala to beneficiary Navigating internal processes Beneficiary protection – separation between money transfer and beneficiary – who is the middle man? How to set up an anonymised system?   Acquiring local currency vs importing USD; but distributing foreign currency might encourage ‘dollarisation’. Risk of increasing inflation. Effects on liquidity in the market Concern over the ability to deliver the cash to the ultimate beneficiary Conduct interviews/surveys to monitory the process – about 10%-25% are interviewed following the distribution Direct cash is now quick to deliver and the most flexible Financial compliance should be strong considering that serial numbers can be tracked      © BEECHWOOD INTERNATIONAL LTD         Mutually beneficial relationship between merchants and NGO – pay small percentage to merchant for exchanging cash for vouchers; we can have more negotiating power re location of pay-out, expenditure Challenge of operating in besieged areas Challenge of going to scale involves verifying and not creating a pull factor for a quick cash generator Vendor management – improved vendor compliance from traditional voucher programmes Reconcile the serial numbers of cash handed out. Track the movement of the cash courier. Highly attractive target for theft; security comes at the cost of some form of arrangement Insurance on the cash being transferred Making sure the documentation of delivery and receipt are available Mobile ATMs can give direct cash Upfront costs into armoured vehicles, security personnel, training, which is higher than others; not necessarily an adequate deterrent (recent case in Iraq/oil company) 34 The dilemma  Assumption of working in a warzone is that you cannot insulate yourself entirely from risk, but you can interpret laws and demonstrate reasonable steps have been taken to minimise risk  If we want hawala to be more formal, we lose our flexibility  Transparency is key, but we need assurance that this will not have an inadvertent negative impact on our ability to continue serving Syrian people  What is our risk appetite when it comes to the regulatory environment? Do we want to help hawala keep its low profile? Risks should actually form part of the design – we need to know what the risks are   Potential solutions  Where there is an issue with a neighbouring country's regulatory system, consider looking to who influences the Government i.e. FATF for Turkey, and explore avenues for third-party pressure to make urgent changes  Look to Arab banks where you could avoid touching the USD system  We need to advocate for change – 'emergency circular' – and explore donors’ role UK/US    Bank sanctions are applied differently by UK versus US banks. UK banks interpret sanctions even more strictly, and can refuse to process transactions that have an indirect link to Syria. For transparency we tell them that the ultimate destination of the money is Syria, even if the transfer is to a bank in a neighbouring country. Advocacy with banks has shut down, and donors have not been able to help My NGO is using the same systems as the bank uses, but some of our payments are rejected. We seem to be looking at the same sanctions list, but come out with different outcomes Turkey  Turkish Government: in the beginning, there was discretion that facilitated crossborder aid, but then it reached such a scale that required a formal registration process, which imposes Turkish legislation on the organisations Syria / banking  Moving money through private banks inside Syria: non-regime held areas are not serviced by banks. There are 14 private banks in Syria, all subsidiaries of regional Arab banks (Lebanese, Jordanian, Kuwaiti, Emirati, Qatari), and they only operate in regime-held territory. This is largely due to the ‘politicisation’ of the sector, following instructions from the central bank of Syria (CBS) to restrict operations in © BEECHWOOD INTERNATIONAL LTD   non-regime held territories – this was accelerated after several bank's branches were attacked; money was stolen, and there were some cases of embezzlement. However, banking operations continue as normal in regime-held areas especially in Damascus, Tartous, Lattakia and Sweida and more recently in Homs. Several private banks reopened their branches in Homs and Hama and some opened additional branches in Tartous and Damascus. Private banks have become more risk averse (they were always conservative in their lending) and have shifted to recover their non-performing loans, with high rates of defaults retail and commercial clients. Most of them have been making losses but thanks to re-evaluating their foreign currency holdings, they continue to post positive net profits (in nominal terms). Businessmen continue to use banks for deposits and accessing services, but banks' loans have mostly focused on providing loans for operational activities with no new investments. Since private banks are not sanctioned (aside from one), they can still have correspondent banking relationships with international banks, and thus access to the international financial system, but the banks are reluctant to make business with Syria-based banks (this dates back to pre-2011). That said, private banks can still send/receive money through their parent banks (or through friendly correspondent banks), by removing information from the transaction. USD is not allowed, but EUR is still used; recipients can only receive the sum of the money transfer, however, in SYP. Forex transactions still take place but only in one direction: foreign currency into SYP. All six state-owned banks are under US and EU sanctions, but the commercial bank of Syria remains the largest one and one of the most active in the country before 2011. Similar to private banks, these banks have considerably restricted their banking services to regime-held territory Iraq   In Iraq operations, USD funds are transferred from our HQ to our accounts in Iraq (Baghdad), and then we can transfer the funds to our partners to implement activities and projects; such as cash activities. However, this is not always good because the whole process of transfer and double-checking by our offices in New York often takes a long time. Funds should be cleared by New York offices before they reach our account in Iraq. For in-country transfers, we also face difficulties with cash liquidity. Due to the banking system procedures and their limited liquidity, sometimes funds are delayed; partners wait for a long time to get the money in their accounts and start the implementation of activities 35 “Donors are reluctant to formalise publicly the use of hawala. This places all legal risks onto implementers and creates a shroud of opacity over their activities, hindering any potential scale-up of cash assistance. Implementers state that this inhibits sharing of information and lessons within the humanitarian community. Nonetheless, it does not appear as if implementers have fully explored options to navigate legal issues and reduce risks – for example what has been offered in the Beechwood report – such as engaging registered hawala dealers in the UAE and London, improving due diligence practices for the use of local hawala agents, exploring mobile money solutions.” Tim Eaton, Syria and its Neighbours Policy Initiative, Chatham House “There is an urgent need to examine the feasibility and benefits of applying emerging tech innovations to streamline and automate transaction processes, including what blockchain can and can't do for mitigating TF, through storing KYC/KYS information and creating a virtual closed currency. However, human factors will continue to be instrumental in the conduct of due diligence, so we must avoid the lure of technology per se and only invest in solutions that will enhance value.” Dr Edwina Thompson, Beechwood International © BEECHWOOD INTERNATIONAL LTD 36 DELIVERABLES AT KEY INTERFACES: CLARITY – CONSISTENCY – COMMUNICATION – ANTICIPATION – RESPONSIVENESS – FLEXIBILITY – TRUST Beneficiary from NGO NGO from Beneficiary NGO from DONOR DONOR from NGO                                                                                    Accountability and transparency Assistance Assistance, protection (incl. their data), consistency, fast, accountability, relevance, professionalism, responsiveness, follow up, continuity, dignity, communication, listen to them, inclusion in the decision making process Assurance, confidence Beneficiary needs to be heard, included in the decision making process Clarity and understanding on what they're getting and what's required to get it: where, how, why, what, what instructions to follow Clearer expectations on deliverables Communication: know objectives Consistency Consistent and reliable provision of services Delivery Efficiency Feedback Flexibility Forward thinking so beneficiary can anticipate challenges NGO is aware of) Guidance Immediate and long term assistance Needs to trust the NGO NGOs to speak with a single voice Protection Quality of service Quick delivery Quick, cost effective, accurate delivery Relevant timely according to need Security Security, access Translate ‘donor speak’ to beneficiaries Transparency Understanding of their context © BEECHWOOD INTERNATIONAL LTD                        Active participation, responsiveness Beneficiary is legitimate Better understanding of the context, needs, biographical info Communication and grass root information Compliance Consistency Context Context Cooperation in service delivery Expect trust and cooperation Expectations Feedback Honest feedback when assessing the services Honesty Listen to instructions – ask questions if they don't understand Listening to their experience Locations Needs Network Risk taking Sharing information Sharing local knowledge Transparency Trust Understand context from beneficiary What they view as priorities          Agreed ways of measuring accountability Ambition and flexibility Belief in their mutual competencies Clear communication Clear expectations Clear goals Clear strategy Commitment Consistency Cooperation with other actors of ecosystem Decisiveness Flexibility Flexibility to learn Funds Knowledge Live up to what you promise Longer term engagement, predictability Priorities Realistic expectations and successive criteria Reality of dealing with uncertainty – punishing not for making mistakes the first time but for repeating mistakes that could be anticipated Shared expectations on strategy and targets Space to figure stuff out when under pressure Speed, adaptability, flexibility, autonomy, efficiency Timeline for project Tolerance Trust Understanding for NGOs to learn from mistakes Understanding the context Want to know you have our back Access to local context (needs assessments) Accountability Accountability Accountability and legality Accountability of finances, quality control Capacity Clear proposals Compliance Consistency Co-ordination with other agencies Delivery Feedback Flexibility Honesty Honesty Innovation Learning from evidence Matching resources to ambition Practicality Predictable, consistent innovation at a low risk Professionalism Realistic expectations Recognising that asks are for a reason Reporting progress Success and innovation Support with advocating with politicians Support with their own accountability to govts Targets Transparency Transparency Value for money 37 CROSS-BORDER MONEY FLOWS TO SYRIA: INTEGRATED RISK MANAGEMENT ?5 PRIORITY 4: IMPLEMENTATION 8 MONITORING (HYPOTHETICAL DILEMMAS D-NAV BRIEFS) PARTICIPANTS LOCATION ISSUE BACKGROUND BRIEF ON THE ISSUE GROUP HUMANITARIAN NEEO BEECHWOOD INTERNATIONAL LTD Inter-agency UN agencies: Syrian Eiesieged areas: rural Damascus. Deir al-Edur city. Feua and lsafraya. Nupl and Eahraa. nerthern Hems imain fecus efdiscussidn en areas besieged by geyernmentferces. pased en the esperience eftwe participants: Ely selecting cash in lieu cfin-ldnd assistance te these areas we cenfrenttwe ethical issues: preyiding an incdme te these whe the siege and their prd?teering partners that manage the subsequent illicit tricl-Je cf cemmedities inte these places warlerds. whether pre-geyt er anti-geyt: inadvertently pretracting the siege as the illicit?ew efgeeds is extremely lucrative and their partners: this has peen neticeaple in areas where pelitical negdtiatiens and requirements appearte haye peen met. but pesiegement centinued ndnetheless. Beth cemmedities and cash have a detrimental inadvertent effect - hy hene?ting armed greups. Heweyer. cash has a 'saying ?yes dimensien in the hesieged areas. peeple living in areas besieged by gearernment and allied militias. eppesitien ferces. and IS. Eeyernmentferces hesieging seyeral repel-held areas as part ef campaign aimed at espelling armed greups -.ria starvatien and indiscriminate hemhardment. Ctppesitien ferces and IS haye empleyed similartactics. te yacying degrees. areas are net cempletely sealed eff. access extremely limited te paint that peeple in same cases literally starye. UN agencies have net had access te preside feed distriputiens since 2014: but lecal NEE-s regularly send cash te salaries -.ria hawala. The Feed Secter has demenstraple data that shews when we have had access te hesieged areas in erderte deli-.rer in-l-.ind relief materials. this has had a direct impact an immediately lewering in?atien rates in the marl-let. In 2014. WFF reached Deuma threugh three inter-agency in March and May with a tetal family feed ratidns [feed fer peeple far 1 Frices efall l-tey cemmedities reduced by This was very unpepularwith these that were hesieging and managing the marl-lets. Furthermere. he side is hlameless in the war ecenemy. when a temperacy cease?re and leesening en the hlecltage was anneunced this Nearemper. items that traders in Eheuta were hearding were suddenly released inte the marl-let ijrem their in erderte hene?t pefere marl-let prices went dewn. Residents efpesieged areas: include rural and urpan marl-.ets. which impacts hew cash is used. Severe: health. feed security. wash. pretectien pregrams. educatien. infrastructure rehapilitatien. shelterfer 38 CROSS-BORDER MONEY FLOWS TO SYRIA: INTEGRATED RISK MANAGEMENT QURRENT STATUS In eastern Ghduta. degree dfaccess yia tunnels and ether smuggling yaries depending dn cdnditidns df conflict. Current garden funds. heath centres. pretectidn educatidn prdjects. HIE-Gs deals directly with suppliers. pays yia hawala transfers Turlrey; alsd paying salaries for local by same means. Ftislrs dfsending cash include threat to life carrying it. Lack dfdata generally remains a huge challenge -we haye insuf?cient eyidence to defend dur decisidn. example. [is aid funding entering besieged areas cdmpared td dtherfundingi'assistance is and requires further analysis. A study cduld determine the effects cash mm a supply?depriyed area; we alsd require an dpen discussidn [and dn Ieyels when it cdmes tn the risks df cash diyersidn dr mdney falling into the wrong hands or being used in illicit actiyities by parties tn the cdn?ict. While this -td an extent? is the case in eyery area bf Syria. pedple trapped inside besieged areas may be more acutely and negatiyely impacted by the actiin ifthe stated purposes are dyerwhelmed by un-enyisaged effects. DESIRED DUTCDME l'yleeting humanitarian needs td greatest extent possible. while minimising war cf siege tactics. Alsd: increased in dealing with besieged areas. including to enable the ccntinuatidn cf e:-:isting 55D Use cash as means dfassistance in besieged areas to support addressing pedples' needs within the area. Test hawala transfers can support Idcal seryice prdyisidn dr actiyities that relate to the prdcurement prdduced items. The may be that the mddality is mere certain actiyities than UtthE. particularly ifthe actiyities targeted dd illiciti' smuggling dperatidns and prdyide for basic needs unmet in a supply-depriyed area. 39 BEECHWOOD INTERNATIONAL LTD CROSS-BORDER MONEY FLOWS TO SYRIA: INTEGRATED RISK MANAGEMENT IRC PARTICIPANTS IRE (Finance; Programs; PolicyIAdyocacysta?} LOCATION Pockets ofnorthern Syria and cross border points Use ofunrestricted cash which the donor is concerned about because ofmoney potentially going to terrorist organisations orspent on unnecessary items ?duciary risk; diversion} HACKERQUND DH THE There are risks that we don?t know where cash gees. Counterterrorism legislation means we need to be able to demonstrate that no funds are being mischannelled; we are allowed to do unconditional cash in non?DTO areas; but not in DTO areas because ofthe But we are unsure what our donor's position is on where the 'safe zone? begins and ends in such a context. Other donors are in different positions and more willing to carry risk. 1ll'lI'hy unconditional cash? - most ef?cient; bene?ciaries prefer; and fastest where IRE operates. Mobility of populations - people moving multiple times means cash is easiest; receiying commodities restricts people in their mobility; supports marketfunctionality. Many bene?ciaries in rural areas ?so trying to reach them and allowing them to use small markets. Household empowerment enabling them to have decision making. BENEFICIARY GROUP HUMANITARIAN NEEIJI CURRENT STATUS a? Cash has a bad ?brand? in this donor; not a level understanding ofwhat it is; how itworks on the ground a? Insuf?cient due diligence on suppliers Gaps in market research on effectiveness ofcash in the areas concerned QUTCDME Providing unrestricted cash to bene?ciaries inside Syria; and donor acceptance as appropriate in this context AchN Combination ofbetter diligence; assessments; and high level adyocacy- David Miliband speaking to USAID Administrator? informed by ?eld?level staffwho share a good understanding ofthe bene?ts of using cash as an aid modality; and how unrestricted can be used in combination with restricted [where it is possible to yetshops for terrorist af?liations}. 40 BEECHWOOD INTERNATIONAL LTD CROSS-BORDER MONEY FLOWS TO SYRIA: INTEGRATED RISK MANAGEMENT GOAL PARTICIPANTS GOAL Syria [Finance and Programs staff] LOCATION ldleb: and north Hama ISSUE To scale up a multi?sectoral emergency response in northern Hama: we are likelyto deal with a regime?connected hawala network. on THE The area changed hands from to AOG control. and there currently are at new lOPs. GOAL has no direct access to the area; it is only accessible by a few Syrian NGOs with limited experience Security is our main concern regarding the presence oleGO staff: due to the factthatthe area is witnessing an ongoing conflict. Armed groups are likelyto sieze a major portion ofin-kind assistance. Markets are still functional. and basic needs are still available for purchase. 1tfendors can be stocked. Initial problems have been ident?ed for to access the market. Multi-donor program. mainlywith OFID funding food and WASH. and EOHOfunding NFI shelter. GOAL does not have the capacityfor health. and there is no current budget for emergency shelter. Ourrent hawala agent does not have the capacity to perform such transaction in such such short notice. Bigger: and probably regime-related companies are able and willing to cooperate with the agencyto deliyerthe seryice reguried. BENEFICIARY GROUP Mixed-background lDF's from Hama and ldleb HUMANITARIAN NEED NFL shelter: health: food: WASH: protection CURRENT STATUS -Limited Syrian partners can operate within the range ofbudget and sectors. with no experience regarding cash or 1.roucher?based assistance. -Only a single hawala partnerthat can provide the large-scale seryices planned. Ooncerns regarding the security of bene?ciary data. and shared liouidity with traders who may be sanctioned. has budget for expertise with two different cash?friendly donors. DESIRED OUTCOME Using donorfunds to reach the EELEJUU in as timely a fashion as possible ideally before Winter arriyes. AchN Use alternatiye proyider proposed by local staffmember- Shalabi family who has long history ofmoneytransferto the region concerned. 41 BEECHWOOD INTERNATIONAL LTD CROSS-BORDER MONEY FLOWS TO SYRIA: INTEGRATED RISK MANAGEMENT Inter?agency PARTICIPANTS l'vlercyCorps, ISIZ, Adam Smith International, UNICEF LOCATION South Syria ISSUE Access to and capacity ofhawalas to implement in an area where we have not implemented before BACKGROUND BRIEF ON THE ISSUE We are observing occurring in other parts ofSyria, speci?cally in north Syria and Hassakeh, though we have girliain the south. Using hawala as a partner has been used successfully as a model in other parts of Syria We wantto do direct cash distribution to bene?ciaries in the south and are incurring challenges in accessing hawalas, including the cost, capacity and feasibility oftheir use especially recognising the ambiguity ofthe legal status. We have questions around speci?c bene?ciary securityi?securityfears in the south, levels ofdocumentation:l controls required in orderto balance quality programming and accountabilityv challenges with papertrail [for hawala and bene?ciaries}. Need to linkwith hawala agent who has capacity to support implementation within these parameters. Need to develop accompanying monitoring system which is workable and achieves desired I required info. BENEFICIARY GROUP in urban areas based on agreed vulnerability criteria HUMANITARIAN NEED Unconditional cash for 6?9 months CURRENT STATUS Assessments have been carried outto determine whether cash is appropriate modality, and whetherthere is suf?cient availability ofstock on markets and bene?ciary access. This provides suf?cient baseline data. DUTCDME Digni?ed living conditions forthe target population, and a relationship builtwith hawala agentthat has capacityi?desire to support implementation successfully to be able to reach vulnerable populations, and to meet risk thresholds Anna" Seeing hawala as a partner, not only as a conduitforgetting cash in, but engaged in implementation and direct contact with bene?ciaries 42 BEECHWOOD INTERNATIONAL LTD CROSS-BORDER MONEY FLOWS TO SYRIA: INTEGRATED RISK MANAGEMENT UNHCR Iraq PARTICIPANTS LINHCR lraq [Finance and Programs} LOCATION Kurdistan region oflraq [three governorates} Getting moneyto the bene?ciaries in Kurdistan area; the blockage is at the stage when implementing partner is trying to get money to bene?ciaries ?the ?last mile?. The local formal ?nancial infrastructure can?t handle it on THE External audit recommended UNHCR stop using hawala in 2013 [for both Syrian and Iraqi refugees}; but banks don?t have the liquidity to be able to cash checks forthe number ofintended bene?ciaries. Considered using smart cards; but the only smart card company in Iraq is government-owned and wasn?t interested in the contract because its not pro?table enough and this company also lacks capacity to meet UNHCR's need. BENEFICIARY GROUP Syrian refugees and displaced Iraqis in NEED individual bene?ciaries households in the area} in need ofcash assistance for different purposes such as buying food and non-food items [especially kerosene}: and forthose living in urban areas: paying rent CURRENT STATUS 0 Considering whetherto use e-moneyfor payments for kerosene and other It would require a lot ofsta? capacity to vet all the merchants Would also have to adjust monitoring systems to ensure that money reached the bene?ciary Takes time to adjust to a totally new system ?stalf: vendors: bene?ciaries will have low con?dence in it initially a 1vendors would likelywant to exchange their accumulated points for cash a Would need receipts signed by bene?ciaries verifying thatthey received the money a E?money would use same system ofscanning bene?ciary IDs and then making the transaction 0 veri?cation process happens atthe point ofbene?ciary registration with UNHCR: which uses iris scanning DESIRED DUTCDME Need veri?cation mechanism thatthe bene?ciary received payment? can print this or even have the receipt transmitted via SMS to partnen?UNHCR PRIDE-USED Anna? 1very high level people at UNHCR to make an organisation?wide decision to pilot or implement the use of e?money to deliver assistance to bene?ciaries 43 BEECHWOOD INTERNATIONAL LTD “Over the two days, it’s been clear there are some very caring people that are doing some fantastic things in very challenging situations. However, there seemed to be an acceptance from some in the room that a proportion of funds ‘obviously’ will get siphoned off in ‘taxes’ to sanctioned entities and warring parties. … I feel they would be wise not to ‘accept that is the way it is’ but at least aim to find more robust ways to ensure that ALL of the money gets to whom it was intended. A very moral high ground attitude some may say, but in my view, if you start from that point it will focus your due diligence and in turn keep the confidence and support of the general public that is so very much needed in this area. The proposed Standard Operating Procedures and set of instructions outlined in the Beechwood report provide an excellent baseline for NGOs to work from, and it was a shame that some had not seen it.” Mark Rogers, Financial Investigator SO15, UK Government © BEECHWOOD INTERNATIONAL LTD 44 “There are number of legal issues at play in this context. Firstly the legal relationship between the stakeholders (donors – INGOs – SNGOs – agents – local authorities and other non-state actors). Secondly the cross-cutting legal issues between financial regulation, charity law, and criminal law (terrorism). Thirdly there is the issue of domestic, or a number of conflicting domestic jurisdictions, and international law. Then there is the Syria-specific issues, such as people in Syria being unable to register in non-state areas, and beneficiaries not having legal status or personal documentation. Finally, there is the issue of how to use the law in terms of advocacy with governments or banks.” Ibrahim Olabi, Founder, Syrian Legal Development Programme © BEECHWOOD INTERNATIONAL LTD 45 How would you rate our quality of thinking after Day 1? © BEECHWOOD INTERNATIONAL LTD Follow-up suggestions after Day 2 • Can we do it again when hawala legality issues are ironed out? Also when donors agree they're happy to use hawala more widely and when agencies don't need to have eyes on the ground at every distribution/redemption point? • Format of the workshop was short but very efficient, therefore there is nothing to improve. What I would suggest though is to do something similar to discuss ways of legalising hawala for cross-border response • Give a direction about how to operationalise the Beechwood report recommendations 46 What did you like about this workshop? Participants               Bringing analysts and implementers together Bringing people from different backgrounds into the discussion Chance to share the ideas/experiences of delivering assistances in different areas/environments Diversity of the attendees Good blend of IPs Good range of people from different sectors – academia Good to hear views from different groups/professionals involved in cash programming Great combination of participants to enable discussion from different perspectives Interesting to have Afghanistan, Somalia and Iraq experience with Turkish and Syrian Mix between the operational, implementation expertise and analysis plus donors and academic knowledge to feed into the discussion that was very useful Participants from multi actors with the presence of experts and field related actors People brought to the table and what they offered – learning from others Really fantastic mix of people all in one room Very valuable to bring analysts and practitioners together … and all actors around a specific goal Content and method          Been to hundreds of workshops, and this was by far the best! Being heard Clear agenda and mix of speakers Concepts to simplify and guide our thinking Delivery method was different than traditional way of conducting workshops Encouraging Enjoyed the simulation, use of technology and pace Excellent room Excellent technical preparations and material © BEECHWOOD INTERNATIONAL LTD                            From my point of view I found it a good and successful workshop in that every player had a chance to talk and transfer the experiences Getting to know more about the CTP background and challenges, being new in this field Good space for discussion about sensitive topic … technology is great! Group learning Interactive nature Involvement of participants actively in tackling issues Learnt a lot Level of interactivity Method used to make the topic understandable in a practical language Mix of the participants and the way they were arranged on each table Motivated me to do something beyond the workshop, and keep connected to other delegates No nonsense business-like approach Open discussion Putting the spotlight on the issues that are always existing behind our humanitarian works such as the link between the CTP activities and the Hawala System Really interactive Share the experience Speed of processing the ideas Tablets allowed a lot of varied perspectives into the discussion Technology Technology of feeding in our discussions Technology – the laptops were great to capture inputs from participants Technology that has been used during the workshop allowed a more efficient comment/opinion sharing; I would assume that it will also be helpful for facilitators to put everything together and analyse Technology to ensure comments/opinions etc of all participants are captured The initiative Tools already developed so thoroughly Way it was structured Workshop is really interesting in the sense that it took on a totally new approach that is interactive and enriching with lots of information 47 What would you do differently and better? Participants           Add the positions of participants in the agenda – who does what and how can we benefit from each of them Bring participants from different depts to get an overall view and not miss important elements Discuss with finance Have more of the right people in the room Have other experience about hawala issues from other country Involve decision makers in future meetings More financial service experts in the room More senior people should be engaged in these conversations More Syrian voices? (where possible) Reduce slightly the number of people so that there is more room for discussion and input – no need for instance to have three or four people from the same organization     Preparation      Content and method        Digging into more specific issues (too broad of a discussion) Expand the workshop to include more topics and finance people Focusing more on the key points I did not really understood the focus of this workshop – CTP in general? Hawalas?... because the agenda and discussions were not always focused on Hawalas. Probably more interesting to go more in depth in the report (great report) Increased mixing of participants for discussion Lacked the practical discussion of actually implementing the projects that some in the early curve of CTP desire Laptops were a nice touch but maybe used a bit too much where it became distracting to having a conversation due to the need to constantly enter and update © BEECHWOOD INTERNATIONAL LTD More clarity/guidance on purpose of different discussions – at time it was a little confusing or felt like conversations were not getting to the point Shame it wasn't possible to better address legal content Think more creatively and be more disciplined Tighter focus   Do the pre-reading properly Make sure everyone understood that the background material was required reading so that the baseline of understanding for the specificities of the subject was more level and we spend less time repeating issues and questions Make sure NGOs bring their own assessments to such a meeting to get full benefit of interacting with external experts and others from the sector Maybe have a catch up session or distribute the pre-reading and reports a little bit ahead of time Maybe more clarity on what's required and what's desired is needed to enable all participants to be more active Sending out objectives/goals of the workshop ahead of time Use the tools already developed Timing/Allow more time         Allow more time to discuss conclusions/takeaways Extended duration of some activities with limitation to others More time for reports from the hubs in order to exchange on different projects/experiences More time to synthesise next steps Perhaps a bit more time Scope was optimistic Stretch out the programme over 2 or even 2.5 day rather than 1.5 day Would have been good to get more into the detail of what next 48 For further information, please contact us. Beechwood International West Wing, Somerset House Strand, London WC2R 1LA Tel: +44 20 7759 1047 Email: workshops@beechwood.net Web: www.beechwood.net www.teamwin.com Workshop sponsors