What Hawala
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Unit 5-Midterm
Critical Issues in Terrorism-CJ 513
By Marsha R. Santos
Professor Tina Jaeckle
August 10, 2010
Describe the “Hawala System.” What makes it successful among its users? Since the September 11, 2001 terrorists attacks on the United States, public interest in informal systems of transferring money around the world, particularly the Hawala System, has increased (Mohammed El-Qorchi, 2010). The reason is the Hawala System’s alleged role in financing illegal and terrorist activities, along with its traditional roles of transferring money between individuals and families, often in different countries.
In early times, this system of informal channels for transferring funds from one location to another was created because of the dangers of traveling with gold and other types of payments on routes beset with danger. It was and still is couriered by providers known as Hawaladars. It is a simple system but yet it can be complex at times (Mohammed El-Qorchi, 2010). It can involve many Hawaladars and works from China, East Asia and into the Persian Gulf Region as well as Africa. While it has legitimate transfers of funds, its anonymity and minimal documentation make it vulnerable to abuse by groups and individuals transferring funds to finance illegal activities.
Hawala System is less expensive, swifter, reliable, convenient and less bureaucratic than formal financial sectors. Fees are lower than banks. This is due to low overhead and absence of regulatory cost. To encourage continued trade through the system, Hawaladars sometimes exempt fees to expatriates and charge higher fees to those who use the system to avoid exchange, capital or administrative controls. There is minimal documentation and little accounting (Mohammed El-Qorchi, 2002).
It is simplicity at its best. Instructions are given to correspondents by phone, facsimile or email and funds are delivered within twenty four hours to even the most...
Critical Issues in Terrorism-CJ 513
By Marsha R. Santos
Professor Tina Jaeckle
August 10, 2010
Describe the “Hawala System.” What makes it successful among its users? Since the September 11, 2001 terrorists attacks on the United States, public interest in informal systems of transferring money around the world, particularly the Hawala System, has increased (Mohammed El-Qorchi, 2010). The reason is the Hawala System’s alleged role in financing illegal and terrorist activities, along with its traditional roles of transferring money between individuals and families, often in different countries.
In early times, this system of informal channels for transferring funds from one location to another was created because of the dangers of traveling with gold and other types of payments on routes beset with danger. It was and still is couriered by providers known as Hawaladars. It is a simple system but yet it can be complex at times (Mohammed El-Qorchi, 2010). It can involve many Hawaladars and works from China, East Asia and into the Persian Gulf Region as well as Africa. While it has legitimate transfers of funds, its anonymity and minimal documentation make it vulnerable to abuse by groups and individuals transferring funds to finance illegal activities.
Hawala System is less expensive, swifter, reliable, convenient and less bureaucratic than formal financial sectors. Fees are lower than banks. This is due to low overhead and absence of regulatory cost. To encourage continued trade through the system, Hawaladars sometimes exempt fees to expatriates and charge higher fees to those who use the system to avoid exchange, capital or administrative controls. There is minimal documentation and little accounting (Mohammed El-Qorchi, 2002).
It is simplicity at its best. Instructions are given to correspondents by phone, facsimile or email and funds are delivered within twenty four hours to even the most...