The Hawala alternative remittance system (or ‘Money Transfer without Money Movement’), June 2013, prepared by: Dr. A. Coutroubis & G. Kiourktsoglou, PhD Cand.

The Context: remittances to developing countries Officially recorded remittance flows to developing countries (2012): $401 bil. Annual growth : 5.3% Expected aver. an. growth (up to 2015) : 8.8% Current projection : $515 bil. by 2015 Source: World Bank, http://goo.gl/vdnCA , [Accessed 03 June 2013]

Informal Value Transfer Systems (I.V.T.S.) 1. Undival (Tamil communities of Sri Lanka) ; 2. Hundi (India) ; 3. Fei Ch’ien (China) ; 4. Padala (Philippines) ; 5. Hui Kuan (Hong Kong) ; 6. Phei Kwan (Thailand) ; Source: Dalhousie Marine Piracy Project: Beating the Banks - Hawala’s Place in the Global Financial Environment and its Potential Links to Piracy, http://goo.gl/j93pg , [Accessed 03 June 2013]

The Hawala alternative remittance system (or ‘Money Transfer without Money Movement’), I 1. Definition: An informal system that allows quick, reliable & inexpensive (apr. 2% com.) transfers of money ; 2. Geography: Somalia, Afghanistan, and Pakistan ; Source: Dalhousie Marine Piracy Project: Beating the Banks - Hawala’s Place in the Global Financial Environment and its Potential Links to Piracy, http://goo.gl/j93pg , [Accessed 03 June 2013]

The Hawala alternative remittance system (or ‘Money Transfer without Money Movement’), II 3. Origins: Unknown; first used in S. Asia and the M. East (Middle Ages); mentioned (8th cent.) in Islamic jurisprudence texts ; 4. Differentiating Features: Trust ; Informality ; Anonymity ; Source: Dalhousie Marine Piracy Project: Beating the Banks - Hawala’s Place in the Global Financial Environment and its Potential Links to Piracy, http://goo.gl/j93pg , [Accessed 03 June 2013]

How does Hawala work? Yasmeen (Agent, Hawaladar, N.Y.) offers: fee of 1 (total: $25) rupee for each $ transferred ; exchange rate of 37 (31) rupees for a $ ; delivery is (not, $40) included ; Abdul is: a Pakistani cabby in N.Y. ; on a tourist visa (long expired) ; to send $5,000 to Mohammad (Karachi) ; Ghulam (Hawaladar / Trader, Karachi) Mohammad (Recipient, Karachi) Source: The Hawala Alternative Remittance System and its Role in Money Laundering, http://goo.gl/2xpU0 , [Accessed 03 June 2013]

Beating the Banks Hawala Banks(s) Account No Yes Time to Delivery 48 hours 5 w. days Exchange Rate 37 / $ 31 / $ Commission / Fee 1 Rs / $ $25 Extras (Courier Serv.) No $40 Remittance in Rs 180.000 154.225 Source: The Hawala Alternative Remittance System and its Role in Money Laundering, http://goo.gl/2xpU0 , [Accessed 03 June 2013]

Hawala Bookkeeping Date Hawaladar Debt Ex. Rate $ Way of Settlement: Bank, Bank Check, Commodity (52 Tolas of Gold, Hindi) Date Hawaladar Debt Ex. Rate $ Source: The Hawala Alternative Remittance System and its Role in Money Laundering, http://goo.gl/2xpU0 , [Accessed 03 June 2013]

Indicators of Hawala, I Source: The Hawala Alternative Remittance System and its Role in Money Laundering, http://goo.gl/2xpU0 , [Accessed 03 June 2013]

Indicators of Hawala, II 1. Bank Account features significant deposit activity in cash and/or checks from members of Afghan, Bangladeshi, Indian, Pakistani and Somali Communities ; 2. Checks may also have some kind of notation ; 3. Bank Account features significant (outgoing) transfer activity to a major financial center known to be involved in Hawala (G. Britain, Switzerland, Dubai…) ; Source: The Hawala Alternative Remittance System and its Role in Money Laundering, http://goo.gl/2xpU0 , [Accessed 03 June 2013]

‘Black’ Hawala Money laundering consists of three phases : 1. Placement 2. Layering 3. Integration Hawala can be used at any phase ! ‘Black’ Hawala has been used in : I. Piracy ; II. Narcotics & Human trafficking ; III. Terrorism ; IV. Welfare Fraud ; V. Insider training ; VI. Customs and Tax Violations ; VII. Gambling ; Source: The Hawala Alternative Remittance System and its Role in Money Laundering, http://goo.gl/2xpU0 , [Accessed 03 June 2013]

Motivations for the Use of Hawala 1. Effectiveness (low overhead, fav. exchange rate, integration with existing busin. activities) ; 2. Time Efficiency ; 3. Reliability ; 4. Lack of Bureaucracy ; 5. Lack of Paper Trail ; 6. Tax Evasion ; Source: The Hawala Alternative Remittance System and its Role in Money Laundering, http://goo.gl/2xpU0 , [Accessed 03 June 2013]

Thank you for your attention. Any questions please?

Back-Up Slides

Businesses more likely to be involved in Hawala 1. Import / Export ; 2. Travel and Related Services ; 3. Jewelry (gold, precious stones) ; 4. FOR.EX. ; 5. Rugs / Carpets ; 6. Used Cars ; Source: The Hawala Alternative Remittance System and its Role in Money Laundering, http://goo.gl/2xpU0 , [Accessed 03 June 2013]