HAWALA INTERPOL PDF

Hawala, an ancient banking system that originated in the Mid- at http:/ /www. In essence, hawala is a transfer or remittance from one party to another, without In the case of India, Interpol places the size of hawala at possibly 40 percent of . One de nition from Interpol is that Hawala is “money transfer without money movement.” Hawala originated in Asia during ancient times, and is used in many.

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ASRs are widespread; they intdrpol in advanced economic systems where the financial system operates efficiently,[2] and in dysfunctional or less-developed financial systems.

The purpose of interppl paper is to review a specific ASR system, the hawala system. The paper emphasis is laid on the purpose and some of the advantages that hawala offers its users. In the second part, the focus shifts to analysing some of the actions taken by the IMF and the FATF in their campaign to combat the hawala system.

The paper concludes by providing some suggestions as to deal with the hawala system. It also has a global-reach as it facilitates the sending of funds from one side of the globe to the next. The distinguishing feature of hawala is its reliance on trust.

The hawala system emerged to finance trade without having to travel with gold or silver, which used to interopl dangerous, as roads used to be beset with pirates and bandits. The system flourished in China, Asia and the Middle East. These individuals send remittances to their relatives back home. Hawala also operates as a settlement process under which the intermediaries settle their accounts and that may lead to money transfer or the exchange of goods and services.

The hawala system provides an interrpol of advantages for its users.

However, before highlighting the major ones, it needs to be noted that the absence of central authority or weak central authority facilitates the rise of hawala and other ITFs. Thus, in Somalia for example, the absence of central government and effective infrastructure encouraged the emergence of the system while in Afghanistan incessant violence especially in the last few decades undermined the official financial system.

It is especially apparent in the less-developed world where the financial system is more open to abuse and manipulation by officials and criminals.

It is noteworthy that in the less-developed world the allure of embezzlement by bank officials is greater because of the low pay received by employees.

Briefing Note – The Hawala System & The International Monetary Fund

This enables criminal elements to use financial inducements to persuade officials to bypass banking laws. The advantages of IFTs are numerous, and thus within the context of this briefing note, only a few would be mentioned. First, IFT is anonymous.

The person sending the funds from Intefpol A to a beneficiary in Country B deals only with the hawalandar who provides the customer with an authentication code which the customer transmit to his beneficiary. The beneficiary collects the equivalent amount of the money from another hawalandarwhich his benefactor had deposited with the hawalandar in Country A. There is no need for paper evidence as the transaction could take place orally or even through the internet in a chat room. Moreover, there is often a door-to-door service, which intfrpol those who intrpol sending money back to ailing or infirm family members.

Second, the system is swifter than the formal banking system, which requires scrutiny over large money deposits to ensure it is not tainted. There are also different working practices and other niterpol that prevent the quick transference of funds from one country to another.

Hawala: The Terrorist’s Informal Financial Mechanism | Middle East Policy Council

Under the hawala the money cash could be in the hands of the beneficiary hawal 24 hours. Holidays, weekends, time differences have little if any affect hawaa using hawala. Moreover, there are instances where conventional banking facilities do not exist, which leas interol the emergence of hawala. Third, the system relies on kinship, ethnic ties or personal relationship between the hawalandars and their customers, which at intterpol meant that funds could be sent before they are deposited with the hawwla hawalandar.

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Fourth, the system is cheaper, as the hawalandars although charging a fee or commission 0. Its aim was to combat the increasing threat that money laundering posed the banking system and financial institution.

To this end, the FATF was entrusted with the responsibility of examining money laundering techniques and trends. This involved the Uawala reviewing the national and international action and setting out what needs to be done to combat money laundering.

Within a year, the FATF issued a report containing a set of Forty Recommendations, which provide a comprehensive plan of action needed to fight against money inteerpol. The First Recommendation emphasises the importance of universal ratification of the United Nations International Convention for the Suppression of yawala Financing of Terrorism and the Security Council Resolution The Convention, which more than one hundred countries have ratified states that intrepol is an offence to directly or indirectly provide or collect funds with the intention or knowledge that they would be use for terrorist activities.

States must also cooperate with other states and provide each other with legal assistance in the matters covered by the Convention. The legal implication for such a declaration is that it allows the Council to take, if it deems it necessary, collective measures under Chapter VII or Chapter VI sanctions.

The Second Recommendation notes the importance of domestic legislation and the need to make the financing of terrorism a criminal act. There has been significant development regarding the domestic criminalisation of terrorist finances according to the reports that states have submitted to the UN Counter-Terrorism Committee as required under Security Council Resolution The Third Recommendation building on Resolution and the Convention centres on the freezing of terrorist funds or assets.

The importance of domestic legislation in this field is emphasised by the FATF. The FATF placed in the Third Recommendation two obligations, the first is the freezing of terrorist intwrpol or assets to prevent terrorist activity. The Fourth Recommendation points to the need for countries, businesses and other entities to notify the competent authorities if they suspect that funds are somehow relates hqwala, or are to be used for terrorism, terrorist acts or terrorist organisations.

Hawaka Fifth Recommendation builds on the need for international cooperation. It has five elements: Under the Sixth Recommendation, the FATF took the unprecedented step of calling on persons or legal entities that provide a service of money or asset transmission to be licensed or registered. The FATF realising that the financial system is open to manipulation and abuse wants to make it more transparent.

The Seventh Recommendation was innovative as it called on states to adopt measures under which financial institutions obtain and hold information on the sender name, address, account number etc. It specifically focused on wire transfer, domestic and international. The Eight Recommendation dealt with non-profit organisations as they are vulnerable to abuse, and therefore countries need to adopt measures to prevent such abuse.

The Ninth Recommendation adopted on October 22, noted that danger hswala by money couriers and called on countries to adopt measures to detect the physical cross-border movement of currency and bearer negotiated instruments. Firstly, it undermines the global financial system as it facilitates the transference of money without records thereby providing an eschewed financial picture.

That is, the transference of unaccounted money into a country has an impact on development and growth of a country as argued by Mohammad El-Qorchi.

On a macroeconomic level hawala undermines growth because although funds change hands from one country to intedpol, as does the value, the broad money-supply remains unaltered.

Hawala – Wikipedia

El-Qorchi also notes that h awala has a fiscal consequence, as tax is not paid on the remittance reducing the revenues of the remitting and receiving countries. The ability of those operating outside of the laws of civil society to use their ill-gotten gains to finance their continued illicit activities damages economies.

On a purely moral basis, a law-based society must ensure that criminals do not operate freely. States must ensure that criminals are itnerpol to use their ill-gotten funds to sow misery and pain. Moreover, it has been suggested that whereas hawalandars in North America may offer better-than-official exchange rates, their counterparts in the Indian subcontinent profit from offering lower rates to those willing on the rate as their prime concern is laundering hawa,a funds.

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We have come along way in a short time. The two conferences on hawala sponsored by the United Arab Emirates leading to the Abu Dhabi Declaration on Hawala [38] emphasised the commitment of the international community and more specifically some of the Muslim countries to deal with IFTs. There have a variety of innovative ideas as to controlling ahwala system: The distinction is significant, as although the system is largely illegal in western economic system they play a major role in the less developed world.

The international community must be aware of the danger of cracking down too hard on the hawala network, which may push its operators and niterpol underground making them far more vulnerable to criminal interool. Policymakers hzwala remember that for many migrant communities some of whom may be unfamiliar with the ways and language of their new homes the h awala system is the cheapest, most efficient way to provide their families with a large portion of their earnings without attraction attention.

Consequently, hawalw only way to control the system is to make the hawala unattractive to its users while also recognising the role that it plays in developing economies.

Maimbo has argued that the choice between formal and informal remittance system rests principally on economics. In other words, sufficient financial incentives encourage remitters to use the banking formal system.

That is, removing or reducing the fees charged on individuals sending money to their families.

Such a system would require a worker having a valid passport or working visa, or any other accepted document and the beneficiary. Banks are already demanding that those drawing cash from account present some level of authorisation and therefore adding such a system would not cost too much to financial institutions. Countries such as Pakistan, which have traditionally benefited from hawala and other remittance systems have introduced legislation demanding that hawalandars register their business with the government and provide documents relating to their transactions, to ensure transparency.

The Korean model worked because the workers were not independent, but it is an example of how some countries have dealt with informal remittance. At the end of the day, the growing threat posed by terrorism and criminal activities demands that the international community must continue to cooperate in improving financial regulations and share information to undermine the incentives offered by the hawalandars.

Available on line at:. Officials came at it as a weapon to defend human rights by taking down corrupt dictators… The current Bush administration treats money laundering strictly as a law enforcement matter backed by diplomacy and is able to do so precisely because it was handed the legal authority by Congress.

Available on line at: Southern traders used the system to sell goods such as tea at the capital and transfer their revenues back home through liaison offices or agencies of provincial governments located at the Imperial Court.

The revenues were used to pay taxes due from the provinces to the central government, without having to transfer large sums of money overland were robbers could attack the shipments. Dawn April 5, The Story of Afghan Warlords London: For the American requirements see for example, Courtney J.

For the Convention see:. Maimbo unfortunately does state whether the banning of informal remittance in India drove the system underground. Remember me on this computer. Adamsky, Dmitry Dima Prof. Res Ayalon, Danny Amb. Ayalon, Shachar Commissioner Ret. Baliani, Diego Balkani, Avner Lt. Bauer, Katherine Behar, Gideon Amb. Ben Artzi, Asher Chief Supt.

Hawala: The Terrorist’s Informal Financial Mechanism

Ben Yaakov, Uri Lt. Res Bennett, Naftali H.

Blum, Yaron Bollag, Josef Dr. Bongers, Rob Borg, Annika Dr. Borochovitz, Eldad Bozna, Menachem Comm. Chaulia, Sreeram Chayot, Eran Dr. Chen, Weixiong Chertoff, Michael H.