1. Network Externalities in Hawala Exchanges Anamaria Berea Department for Computational Social Science Center for Social Complexity at Krasnow Institute for Advanced Studies George Mason University

2. Introduction What is hawala? – exchange mechanism self-enforced by trust and reputation Similar to Western Union Mostly associated with certain foreign remittances No data - social network analysis Kuran, 2004: specific informal Islamic institutions lead to lock-in situations Other business associated with the money transfer practice

3. Hawala Mechanism

4. Purpose of this research A methodological proposal on the empirical observations Common-pooling SNA techniques with nested game theory Not-empirically exhaustive, but empirical dataset mapping

5. Method of Analysis 1. Building the datasets by proxies and informational conjectures: - proxy: the Pakistani players in major international business (hawaladars network; Pakistan vs. Afghanistan) - proxy: the pool of countries under scrutiny for remittances by Interpol and UN frozen assets - 3 files: personal ties, business ties and locations (mini-clusters)

6. Method of Analysis 2. Analyzing the datasets: - nested game hypothesis (Tsebelis, 1991) – correlation matrix - shows the network externalities

7. Results and Findings

8. Ego Networks in Terrorism

9. Betwenness Centrality for Location

10. The associated businesses network

11. Terrorism Periphery and Lock-in Hypothesis

12. MDS with geodesic distances

13. Degree centrality in the correlation matrix

14. Discussion Network externalities: drugs, gold, Dubai and Mumbai Lock-in emergence: terrorism in NWFP High Centrality Measures for ObL, Dawood Ibrahim and TTP This method of analysis by proxies and game theory validates conceptual and theoretical publications

15. Thank you! Questions?