Hawala System

1730 Words 7 Pages
In this research paper I will portray and focus on the hawala system. The general outline of this paper is as follows: a description of the hawala system; why certain terrorist groups use the system; which terrorist organizations use the system how it can be advantageous for terrorist groups to use; the relevance of the system; what the counterterrorism implications are for the United States in regards to the hawala system.
What is the hawala system? The hawala system is a way for individuals to channel money. Unfortunately, terrorists will often use this system to move money around. Terrorist organizations that are financially destitute are unlikely to perform well. They are unlikely to thrive. They are unlikely to be able to coordinate
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It is not something new and faddish. In fact, in India and other parts of Asia, the hawala system has been around for quite a long time. Patrick Jost and Harjit Singh Sandhu assert that the hawala system has been going on for at least three centuries. The authors state “hawala predates ‘traditional’ or ‘western’ banking (the first ‘western bank’ in India was the Bank of Hindustan, established in Calcutta around 1770)” (Jost & Sandhu, 2000). The system is actually mentioned in very old texts of Islamic jurisprudence. The Economic Expert website states: its origins are not entirely clear, but it is believed to have been used first in the financing of long-distance trade in the early medieval period on trading routes such as the Silk Road, the Eastern Mediterranean and the Indian Ocean. Hawala is mentioned in texts of Islamic jurisprudence as early as the 8th century. In South Asia, it appears to have developed into a fully-fledged money market instrument, which was only gradually replaced by instruments of the formal banking system in the first half of the 20th century. Giving this brief historical background of the hawala system is to emphasize the fact the system has been around for quite a long time. The hawala system is certainly not something new and individuals have been taking advantage of this avenue of underground money transferring for a considerable amount of time. Additionally, although this will …show more content…
I have shown, without a doubt, the security-risk that the hawala system poses. In my opinion, it is going to be very difficult to stop the hawala system, mainly because of its underground nature and lack of regulation. Realistically speaking, it may be nearly impossible to completely abolish it. That is, due to its underground nature, the hawala system will never go extinct. Instead of stopping the hawala system, I think it is much more of a realistic goal to try to decrease terrorist’s usage of the system. At the same time, honest people that are trying to send money back home should be allowed to continue using the system. In other words, I think a realistic goal is to decrease terrorist funding through the system; but continue to allow the system, whenever and wherever it is used for legitimate purposes, to flourish. There should be a distinction between people that use the system for legitimate versus illegitimate and illegal purposes. A distinction should be made because I think it would be counterproductive, inconsiderate and inhumane, to not allow honest people that are trying to lift themselves out of poverty, to send money back home to their impoverished families. Additionally, there is a strong cultural aspect associated with the hawala system. This aspect would make it difficult to completely end the system

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