The Hawala remittance system

1
The Hawala remittance system

• Nuno Rogeiro
• IEA-Euro Atlantic Institute
• Lisbon

2
Definition and reality

• What An alternative, informal, financial
  remittance system
• Where Middle East, Africa, Asia
• When Middle Ages to today
• For whom? Initially, people living far away.
  After, poor and migrant populations. Now, migrant
  workforce.

3
Principles

• Contractual oral /personal trust
• Oral (amply) defined mandate (the origin of
  Italian Avalo and French and Portuguese Aval)
• Flexible network of Hawaladars, generally chosen
  according to route
• Service commission, no profit
• No document trail (except in Hundi)
• Personal settlement of arising problems

4
Advantages for users

• Informal value transmission system (IVTS)
• Discretion
• No unexpected fees
• No continued fees
• Tax, immigration,money rating, legal avoidance
• Mission Impossible type of task for couriers
• Possibility of supplementary income for brokers

5
How relevant

• 100 billion USD in transactions, pre 911
• Increased migrant populations in Europe
• A decline after 911
• Still very relevant in India and Pakistan
• Formal Banking losses

6
What it is not, in principle

• A true, full fledged, all operations bank
• A multi-service structure
• A legal, registered business
• A totally invisible structure
• An always presumed money laundering scheme
• A true charity or uninterested public service

7
The Al Barakhat case

• Founded in 1985 in Somalia, by Ahmed Jumala
• Main initial reasons collapse of the
  administrative system, important migrant
  population, difficult communications, etc.
• Originality non typical Hawala, combining formal
  and informal elements
• Under fire in the Horn of Africa and the US
• Danger easily penetrated

8
What you do not see...

• A true dilemma is the need to have publicity and
  transparency, and at the same time the
  inclination not to precipitate social crises
  among migrant workers
• The growth of formal popular banks, with
  reduced rates and flexible, tailored services
• Is it possible to fully integrate Hawala into the
  open air economy?

9
What you do not see (2)

• 911 was not funded by Hawala mechanisms
• Part of the March 11, 2005, Madrid operation may
  have been
• Some signs in Bali, Mombassa, Dar es Salam and
  Nairobi
• Hawala and bulk cash carrying the network and
  its parts