Hawala or hewala (Arabic: ?????? ?, which means transfer < i> or sometimes trust ), also known as hundi or - in Somali, xawala or xawilaad - is a popular and informal value transfer system that is not based on cash movements, or on telegraph or wire transfers of computer networks between banks, but on the performance and respectability of large money broker networks (known as "hawaladars"). While hawaladars are scattered throughout the world, they are mainly located in the Middle East, North Africa, Horn of Africa, and Indian subcontinent, operating outside, or parallel to, traditional banking, financial channels, and remittance systems. Hawala follows the Islamic tradition but its use is not limited to Muslims.
Video Hawala
Origins
The hawala system has existed since the 8th century between Arab and Muslim traders along the Silk Road and beyond as a protection against theft. It is believed to have appeared in the financing of long-distance trade around the capital trading center that emerged early in the medieval period. In South Asia, it seems to have evolved into a full money market instrument, which was only gradually replaced by the instruments of the formal banking system in the first half of the 20th century.
"Hawala" itself affects the development of agencies in common law and civil law, such as aval in French law and avallo in Italian law. The words aval and avallo themselves come from hawala . The transfer of debt, which was "not permitted under Roman law but became widely practiced in medieval Europe, especially in commercial transactions", was due in large part to the "trading done by Italian cities with the Muslim world in the Middle Ages". The agency is also "an institution not known to Roman law" because there are no "individuals who can conclude binding contracts on behalf of others as agents". In Roman law, "the contractor himself is considered a party to the contract and needs a second contract between the person acting on behalf of the principal and the last in order to transfer the rights and obligations derived from the contract to him". On the other hand, Islamic law and general law then "have no difficulty in accepting the agency as one of the agencies in the field of contracts and obligations in general".
Currently, hawala may be used primarily for remittances of migrant workers to their home country.
Maps Hawala
How hawala works
In the most basic variant of the hawala system, money is transferred through a hawala broker network, or hawaladars . This is a money transfer without actually moving it. In fact, the definition of a successful hawala system used is "money transfer without money movement". According to author Sam Vaknin, while there are large hapatadar operators with intermediate networks in cities in many countries, most hawaladars are small businesses that work in Hawala as a byproduct or after-sales service.
The picture shows how the hawala works: (1) the customer ( A , the left side) approaches the hawala broker ( X ) in one city and gives the amount of money (red arrow) to be transferred to the recipient ( B , right side) in another city, usually foreign ,. Along with money, he usually specifies something like a password that will lead to the money paid (blue arrow). (2b) The air calls another hawala broker M in the receiving city, and notifies M of the agreed password, or provides other dispositions of the funds. Then, the intended recipient ( B ), who has also been notified by A about the password (2a), is now approaching M and telling him the password agreed upon (3a). If the password is correct, then M releases the amount transferred to B (3b), usually minus a small commission. X now essentially owes M the money that M has been paid to B ; thus M should trust X ' to pay off the debt in the future.
The unique feature of this system is that no promissory instrument is exchanged between the hawala broker; transactions take place entirely on the honor system. Because the system does not rely on law enforcement claims, the system can operate even in the absence of a legal and juridical environment. Trust and wide use of connections are the components that distinguish it from other remittance systems. The Hawaladars network is often based on membership in the same family, village, clan, or ethnic group, and fraud is punished by effective communication and "loss of honor" - which causes severe economic hardship.
Informal records are generated from individual transactions, and the running calculations of amounts owed by one broker to another are kept. Debt settlement between hawkers can take many forms (such as goods, services, property, employee transfers, etc.), and no need to take the form of direct cash transactions.
In addition to commissions, hawala brokers often benefit them through passing the official rate. Generally, funds go into the currency system of the source country and leave the system in the recipient country's currency. Since settlements often occur without foreign exchange transactions, they can be done apart from the official exchange rate.
Hawala appeals to customers because it provides quick and convenient funds transfers, usually with commissions much lower than those charged by banks. The advantage is most prominent when the recipient country implements unfavorable exchange rate rules or when the recipient banking system is less complex (eg, due to differences in legal environments in places like Afghanistan, Yemen, Somalia). In addition, in some parts of the world it is the only option for legitimate transfer of funds, and has even been used by aid organizations in areas where it is the best functioning institution.
Regional variant
Dubai has stood out for decades as a friendly hub for hawala transactions around the world.
South Asia
Hundis
The hundi is a financial instrument developed in the Indian sub-continent for use in trading and credit transactions. Hundis is used as a remittance instrument to transfer money from one place to another, as a form of credit instrument or IOU to borrow money and as a bill of exchange in a trade transaction. The Reserve Bank of India describes Hundi as "an unconditional written order made by someone who directs others to pay a certain amount to someone named on the order."
Angadia
The word angadia means courier in Hindi, but also refers to those who act as hawaladars in India. These people mostly act as a parallel banking system for entrepreneurs. They charge a commission of about 0.2-0.5% per transaction from transferring money from one city to another.
Horn of Africa
According to the CIA, with the dissolution of the official Somali banking system, many informal money transfer operators, rose to fill the void. It estimates that the hawaladars , xawilaad or xawala brokers, is now responsible for up to $ 1.6 billion a year in shipments to countries, some big comes from Somalis working outside Somalia. These funds in turn have a stimulating effect on local business activities.
West Africa
The 2012 Tuareg Rebellion left North Mali without an official money transfer service for months. The coping mechanisms that appear are patterned on the hawala system.
Removal of money laundering post 9/11
Some government officials claimed that hawala could be used to facilitate money laundering, avoidance of taxation, and transfer of wealth anonymously. As a result, it is illegal in some US states, India, Pakistan, and several other countries.
After the September 11 terrorist attacks, the US government suspects that some hawala intermediaries may have helped terrorist organizations transfer money to fund their activities, and the 9/11 Commission Report states that "Al Qaeda often moves money raised by hawala". As a result of strong pressure from US authorities to introduce systematic anti-money laundering initiatives on a global scale, a number of hawala networks were shut down and a number of hawaladars were successfully prosecuted for money laundering. However, there is little evidence that this action brings authorities closer to identifying and capturing large numbers of terrorists or drug smugglers. Experts emphasize that the majority of those using this informal network do so for legitimate purposes, and only choose to use transactional media other than the state-backed banking system. Currently, the hawala system in Afghanistan is instrumental in providing financial services for the delivery of emergency aid and humanitarian assistance and development for the majority of international and domestic NGOs, donor organizations and development aid agencies.
In November 2001, the Bush administration froze the assets of Al-Barakat, a Somali moneymaker largely used by large numbers of Somali immigrants. Many of his agents in some countries were initially arrested, though later released after no concrete evidence against those found. In August 2006, Al-Barakat's last representative was removed from the US list of terror, although some assets remain frozen. The mass media have speculated that pirates from Somalia use the hawala system to transfer funds internationally, for example to neighboring Kenya, where these transactions are not taxed or recorded.
Source of the article : Wikipedia
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