Financial Crime World

Hawala: The Global Financial Network

The Hawala system, a financial network that operates outside traditional banking channels, has been the subject of a recent study that sheds light on its widespread use and potential vulnerabilities.

Hawaladars: A Global Presence

Researchers interviewed 113 Hawaladars from around the world and found that they sent funds to customers in 18 countries across three continents: Near and Middle East/South-West Asia, Western/Central Europe, and South-Eastern Europe. The majority of transactions processed by interviewed Hawaladars were international.

Services Offered

Hawladars primarily provide money transfer services, but many also offer additional financial services such as:

  • Cash savings
  • Currency exchange
  • Short-term lending
  • Safekeeping of funds
  • Trade guarantees

The amount of funds kept for safekeeping by interviewed Hawaladars ranged from $20,000 to $500,000.

Business Diversification

Many Hawladders operate multiple businesses alongside their hawala operations, including:

  • Grocery stores
  • Travel agencies
  • Mobile top-up card sales
  • Construction companies
  • Electronics shops

Vulnerabilities and Misuse

The study also highlighted the vulnerabilities of the Hawala system to misuse by organized crime groups. More than one-third of the interviewed Hawaladars believed that the system is more vulnerable to illegal transactions compared to traditional banking systems.

Criminal Activities

The ease of use, accessibility, reliability, and confidence in the Hawala system make it an attractive option for organized crime groups. Seventeen percent of the interviewed Hawaladars believed that Hawaladars might be involved in opiate trafficking, while 22% rejected this possibility and 30% said they didn’t know.

Challenges for Law Enforcement

Law enforcement agencies face significant hurdles in investigating crimes linked to Hawala systems due to:

  • The closed nature of the business
  • Kinship ties of the actors involved

Policy Implications

The study’s findings have important implications for policymakers, regulators, and law enforcement agencies seeking to combat money laundering and terrorist financing. The researchers emphasized the need for greater oversight, regulation, and guidelines to ensure that Hawaladars operate within legal frameworks and do not facilitate criminal activities.

Key Findings

  • 113 Hawaladars from 18 countries were interviewed for this study.
  • Funds were sent to customers in three continents: Near and Middle East/South-West Asia, Western/Central Europe, and South-Eastern Europe.
  • The majority of transactions processed by interviewed Hawaladars were international.
  • Hawaladars provide a range of financial services, including money transfer, cash savings, currency exchange, and trade guarantees.
  • The system is vulnerable to misuse by organized crime groups due to its ease of use, accessibility, and reliability.
  • Some Hawaladars may be unknowingly facilitating criminal activities, including opiate trafficking.