A case study on the misuse of hawala banking

Abstract

Purpose -Since 9/11, hawala banking (financial service providers who carry out financial transactions whereby cash, cheques or other valuable goods are accepted at one location and a corresponding sum in cash or other remuneration is paid at another location) has attracted a great deal of attention. Much has been written on the subject, but so far little empirical research has been conducted into the misuse of hawala banking for criminal purposes. This paper aims to fill this gap. Design/methodology/approach -The paper contains an analysis of 12 police files on the use of hawala banks by perpetrators of crime. The data gathered from these cases are compared to what has been reported on hawala banking in the existing literature. Findings -The literature emphasises the importance of trust between client and banker, as well as between hawala bankers themselves. Trust is supposedly based on strong social ties (ethnic and family ties). The 12 cases studied (almost all of which concerned the misuse of hawala banking by drug dealers) put the significance of trust into perspective: the importance of ethnicity and personal trust should not be exaggerated. When the stakes are high, a common social background and shared ethnicity between bankers, as well as between bankers and their clients, seems to be less important than is often assumed. Originality/value -The paper goes beyond the traditional focus on trust and strong social ties.

An Empirical Investigation of E-Banking in the Kurdistan Region of Iraq: The Moderating Effect of Attitude

“…Hawala is a local traditional transaction system (Schramm & Taube, 2003) for money transfer between the KRI and other countries, no matter whether for business or for other purposes based on using the Jordan, Iran or United Arab Emirates banking sectors. Most of the foreign exchangers offices use Hawala instead of using the KRG banking sector (Bunt, 2008;Liargovas & Repousis, 2011). The Hawala system is cheaper, faster and more trustworthy compared to the banking system in the KRI because of past performance of the KRI banking system (Faith, 2011;Ismail, 2007).…”

The moral discourse of banks about money laundering: an analysis of the narrative from Paul Ricoeur's philosophical perspective

“…But according to Perkel (: 184), most money that is transferred from informal value transfer systems (such as hawala systems) is ‘clean money’ and not dirty money (drawn from illegal activities). Van de Bunt (: 691) rightly said that hawala banking is not equivalent to money transfer systems, which are offered by nonbanking financial institutions (such as Western Union and MoneyGram) since hawala banking is not certified and supervised by governments. As Zagaris (: 159) said, informal value transfer systems are characterized by anonymity and a lack of official scrutiny.…”

More Than a Criminal Tool: The Hawala System’s Role As A Critical Remittance Channel for Low-Income Pakistani Migrants in Dubai

“…Following the aftermath of the 9/11 terrorist attacks in New York City, global scholars have framed contemporary literature on unregulated or informal remittance channels-most commonly known as the hawala (in Arabic) or hundi (in Hindi and Urdu)-from a security perspective. 1 The current dominant perspective is that unrecorded remittances have been used for money laundering, terrorist financing, smuggling, and other illicit activities (Jost and Sandhu, 2000;Naufal, 2011;Nawaz et.al, 2002;Ballard, 2005;Casey, 2007;Bunt, 2008;Financial Action Task Force on Money Laundering, 2010;Shabib-Ul-Hassan and Naz, 2012;Dedin et.al 2014). While some literature has highlighted the critical importance of hawala in the context of nationbuilding and humanitarian crises (see Thompson, 2008;Maimbo, 2003), the prevailing discourse on the hawala system has centered around its use for criminal purposes rather than its development potential.…”

“…Passas (2006) acknowledges that the hawala system has "come under suspicion of being a tool in the hands of al Qaeda and other terrorists" operating in parallel to the global financial market." Furthermore, the international community has also placed strong emphasis on the hawala system's complex relationships with the informal economy, highlighting the predominant misuse of the hawala systems by criminals and smugglers (Bunt, 2008). These underground economies are often inevitable products of globalization due to complex factors like networks, personal trust, shared ethnicity, and common backgrounds that sustain the rapid yet unregulated evolution of the hawala systems (Bunt, 2008;Ballard, 2005;Glushchenko, 2005).…”