The Hawala Extortion Method 
HAWALA
INTRODUCTION
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Among the methods terrorists worldwide use to move money from regions that finance them to target countries some hardly leave any traceable trail. As regulators learned recently, one of the weak points in the payments chain through which illicit funds can enter is a system of traditional trust-based banking originating in southern Asia which is known as hawala.
The word hawala is Hindi meaning "trust" or "exchange". Often used in relation with the word hundi which stands for "bill of exchange" hawala is an unofficial alternative remittance and money exchange system enabling the transfer of funds without their actual physical move. Traditional financial institutions may be involved but more often the system is used to bypass banks. There are an estimated 3000 international hawala brokers operating in Asia. Allegedly the business is monopolized by migrants from India who mostly operate from countries in the Gulf and South East Asia. Networks include trading points in the financial centres of Singapore and Hong Kong, and some of the biggest family-based money-dealers are based in London.
In principle, hawala works as follows: Individual "brokers" or "operators”, known as hawaladers, collect funds at one end of the payment chain and others distribute the funds at the other.
For example, an expatriate working in America or Kuwait who wants to send money back to his family in Pakistan or Syria turns to a moneylender or trader with contacts in both countries giving him the money. The trader calls a trusted partner in the home country who delivers the amount to the family, minus a commission. For identification and the details of the trade often a code is used. The two traders settle accounts either through reciprocal remittances, trade invoice manipulations, gold and precious gem
smuggling, the conventional banking system, or by physical movement of currency. Usually, hawaladers operate independently of
INTRODUCTION
[pic]
Among the methods terrorists worldwide use to move money from regions that finance them to target countries some hardly leave any traceable trail. As regulators learned recently, one of the weak points in the payments chain through which illicit funds can enter is a system of traditional trust-based banking originating in southern Asia which is known as hawala.
The word hawala is Hindi meaning "trust" or "exchange". Often used in relation with the word hundi which stands for "bill of exchange" hawala is an unofficial alternative remittance and money exchange system enabling the transfer of funds without their actual physical move. Traditional financial institutions may be involved but more often the system is used to bypass banks. There are an estimated 3000 international hawala brokers operating in Asia. Allegedly the business is monopolized by migrants from India who mostly operate from countries in the Gulf and South East Asia. Networks include trading points in the financial centres of Singapore and Hong Kong, and some of the biggest family-based money-dealers are based in London.
In principle, hawala works as follows: Individual "brokers" or "operators”, known as hawaladers, collect funds at one end of the payment chain and others distribute the funds at the other.
For example, an expatriate working in America or Kuwait who wants to send money back to his family in Pakistan or Syria turns to a moneylender or trader with contacts in both countries giving him the money. The trader calls a trusted partner in the home country who delivers the amount to the family, minus a commission. For identification and the details of the trade often a code is used. The two traders settle accounts either through reciprocal remittances, trade invoice manipulations, gold and precious gem
smuggling, the conventional banking system, or by physical movement of currency. Usually, hawaladers operate independently of