Critical Issues in Terrorism (the Hawala System)a

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Midterm Essay
Arthur J Wilson III
CJ513: Critical Issues in Terrorism
Kaplan University
January 17, 2011

1. Describe the “hawala system.” What makes it successful among its users?
Hawala , also known as hundi , is an IFT (informal money transfer system), based on the performance and honor of a huge network of money brokers who are primarily located in the Muslim World, i.e. the Middle East, Africa and Asia. It is an ancient system that has existed for thousands of years and serves as a parallel system to the world’s financial networks. China also has such a system, known as chop, chits or flying money. The essential components of this system are honor and trust, and without either it cannot work for the “hawalador” or agent and the person sending or receiving the money. Since this system keeps not records of transactions other than what is owed to the hawalador agents by other hawaladors its transactions are virtually untraceable. If an “agent” violates this trust he is removed from the system and is unable to act as a money transferor. At first glance, the Hawala system would seem to be a western union style program setup to deliver money to individuals around the world. It is not, Hawala not only deals in cash transactions but it also makes use of goods and services. The system works like this, a person needing to send money to his family “back home” approaches a Hawala agent. This agent has a network of family, friends, business partners, or contacts in the location receiving the money. The person sending the money gives the “agent” the amount to send. The agent then contacts a hawalador on the receiving end, either through phone, fax, email, or text and issues instructions on the amount to be paid and to whom. The sending agent then records the debt owed to the receiving agent and within hours the family receives the money. There are more things involved in this transaction that just the sending and receiving of money, but again the only...
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