Date of Award
Master of Science (MS)
Informal value transfer systems (IVTS') predate not only traditional banking systems, but the entire Western European civilization as well. Used as a reliable method to transfer value from one geographic region to another through a close-knit network of trusted individuals, IVTS' serve as an invaluable facilitator for the movement of billions of dollars across international borders without ever leaving a paper trail. The term “hawala”, which is Arabic for “transfer” or “trust”, is an IVTS that serves as a parallel banking system for those wishing to send value (often in the form of currency) overseas. Hawala has historically thrived as a connection to the global economy in parts of the world where sociopolitical unrest may have disrupted day-to-day financial activities and its resilience, among other factors, has propelled it to the preferred method of value movement by its customers (Viles, 2008).
With conservative estimates between $100 billion to $300 billion annually, the massive movement of value through hawala on a global scale continues to be unregulated and operates in secrecy through trusted networks that have been in place for centuries. Consumers of hawala range from individuals wanting to send remittances to relatives in a foreign country to terrorists attempting to fund their activities under the radar of government surveillance (Dougherty, 2006). While there are obvious and glaring money laundering risks associated with hawala, do the dangers of regulating such a robust IVTS outweigh the benefits of complying with U.S. laws and regulations?
Henry, Morgan, "Hawala: How Extralegal Compliance Helps Bank the Unbanked" (2017). Economic Crime Forensics Capstones. 19.