ISLAMABAD, Pakistan (AP) – U.S. Treasury Secretary John Snow praised Pakistan on Friday for choking off terrorism funding by clamping down on the underground “hawala” banking system used to send money around the world with few traces.

The United States has been pressing countries to regulate the system, used by thousands of legitimate businesses, but also terrorists and criminals.

“Pakistan has made enormous strides and is a strong partner with the United States in the global war on terror,” Snow said. “The evidence of that is the strong actions that have been taken on money laundering, and registration and regulation of hawala networks.”

Under the ancient practice, people transfer money without paperwork by using money traders who have counterparts in other countries.

Hawala agents can be found throughout the region. Afghans rely on them because the country has few banks. Many Pakistanis and other Asians who work in low-paid jobs in the Persian Gulf states and elsewhere use them to send money home.

Pakistani President Gen. Pervez Musharraf’s government passed a law last year that requires hawala dealers to register with the government and document their transactions.

Since then, the government has ordered the closure of dozens of unregistered hawalas. Pakistan’s Central Bank said Friday it revoked the license of an unregistered dealer after it was found to be involved in illegal currency transfers.

Despite the closures, some underground hawala dealers continue to operate.

“If you go into markets in Karachi or other cities, a few old unregistered dealers are still there,” the owner of a legal hawala dealer in Islamabad told The Associated Press on condition of anonymity. “The government can’t do anything about that. Their businesses are too small.”

Pakistani Finance Minister Shaukat Aziz said the international community must coordinate its efforts to further stem the flow of money to terrorists.

“More needs to be done worldwide,” he said at a joint press conference with Snow.

President Bush pledged $1.4 billion earlier this month to repay allies such as Pakistan, which is searching its northern tribal areas for members of al-Qaida. The money is part of an $87 billion request for extra funds for Iraq and Afghanistan.

Snow also said a $3 billion U.S. economic aid package, promised to Pakistan following Musharraf’s meeting with Bush in June, is likely to be approved by Congress.

“I don’t see any difficulty in preceding with that understanding,” he said.

The money is expected to be spread over five years, and will be spent equally on economic initiatives and defense.

The U.S. Embassy said Snow met with Musharraf and Prime Minister Zafarullah Khan Jamali to discuss “the need for continued economic reforms and pro-growth policies that will strengthen this key ally in the war on terror.”

The treasury secretary was in Islamabad for two days following a brief visit to the Afghan capital, Kabul, where he said the country remains a “critical priority” for the United States despite the cost of operations in Iraq. He also said he expected Saudi Arabia and other nations to meet a U.S. request for more money to help rebuild the two war-shattered countries.

In a meeting with a group of business leaders, Snow said an economic recovery in the United States was underway, but he urged Europe and Japan to reform their economies to help boost global growth.

“We are coming out of our long anemic economic performance,” Snow said.

Snow repeated his prediction the U.S. economy will expand by more than 4 percent next quarter and in 2004. He said Bush’s tax cut helped underpin recovery.

Snow, who is on a 10-day trip to South Asia and the Middle East, heads to Dubai next for annual meetings of the 184-nation International Monetary Fund and the World Bank.

AP-ES-09-19-03 1521EDT

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