An article in the Washington Post reports moves against a couple of the larger ‘Hawala’ networks. Also: “Under the new anti-terrorism legislation passed by Congress last month, hawalas will be required by year-end to register with the Treasury Department and, like banks, to report suspicious activities, such as unusually large cash transfers.”
The idiots seem to completely miss the point about why people use hawala (or Chinese ‘Fei Qian’) to move money internationally. It is so that the state cannot see what they are doing. To demand hawalas register with the state and report ‘suspicious activities’ is rather like passing a law requiring bank robbers to register and file a report prior to conducting a robbery. Do terrorists use hawala? Probably. So do millions of other people. Will they manage to shut the system down (which has been around since the 11th Century in India, China and other parts of Asia)? My guess is they will be even less successful than that other triumph of the state’s excursion into international paramilitary policing, namely the ‘Drug War’. These hawalas occur within ethnically homogenous tight knit communities. It is going to be impossible to shut down more than a few of these dispersed, multiply redundant networks as they are semi-underground as it is and extremely easy to set up again by others if any given hawala is disrupted.
What is a hawala?
A hawala (or fei qian) is a simple network set up to transfur funds internationally, usually using a member of an extended family or personal friend on both sides of the network (though a few larger hawalas are almost like banks). Vijay (or Abdul or Deng) goes to a hawala (typically a small back street office) in London (or Los Angeles or Paris or Toronto) and gives them a quantity of cash plus a small brokerage fee. He tells the hawala who he wants to collect the money in Calcutta (or Karachi or Cairo or Shanghai) and then leaves. The business is conducted with a handshake and trust. The hawala in London calls his contact in Calcutta (often a cousin or other family member) and tells him how much to disburse and to whom. This is often done on the phone but increasingly it is done by PGP encrypted e-mail. Next day, a relative of Vijay (or Abdul or Deng) goes to the hawala in Calcutta, identifies himself to the associated hawala there and collects his cash. The hawala run accounts with each other and periodically settle up the old fashioned way: a guy with a suitcase packed full of used 50 pound notes (or 100 dollar bills) gets on a plane in London, flies to Calcutta and settles the tab in cash. It is that simple!
In fact they are an excellent example of highly successful, completely unregulated, handshake based international capitalism. Hence is it hardly surprising so many people in government do not like these networks as it gives lie to all the smug claims about the supposed superiority of the West’s regulated international financial systems.
