The Hawala System Abstract

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TheHawala System


The hawala system is an informal approach that people use intransferring funds from one point to another through the hawaladar,who is the service provider in the scenario. This paper reveals howthe hawala system works and shows that the terrorists are the mostpeople using it as well as the drug dealers. In the process, it hasfacilitated money laundering and shows the need for theanti-terrorist funding experts to intervene. However, it willillustrate how the secrecy of the hawala system makes it hard totrack the origin of the funds. It will insist on using the humanintelligence to monitor the movement of the funds as opposed to thecurrent surveillance system. It will also suggest the legalization ofthe hawala system to allow the proper documentation and thesurveillance of the funds too. The two approaches will help inreducing the terrorist activities in the US.

The Hawala System

The hawala system is an informal channel that people will use inmoving funds through their service providers that are known as thehawaladar. The hawala is often a paperless system that does notinvolve any documentation, and it maintains total secrecy. In mostcases, the immigrant workers in the developed nations are the onesthat mostly initiate the system when they want to send money to theirfamilies in the developing nations. The nature of the system has madeit hard for the government to track the movement of the funds sincethe terrorists and the drug dealers often use it for the moneylaundering purposes. The anti-terrorist funding experts will oftenstruggle in identifying the movement of the funds since the hawalasystem operates secretly. Monitoring the movement of the funds willneed the presence of human intelligence. Hence, this essay willreveal how the secret nature of the hawala system makes it hard todetect the movement of the funds but, increasing the humanintelligence to track the funds or even making the system legal andintroducing the documentation will be more appropriate in controllingit. (Thesis)

As an anti-terrorist funding expert, detecting how the funds movethrough the hawala system will be a challenge because of its secrecy.More specifically, the system skips the documentation process thatthe legal transaction follows. In most cases, the underground natureof the system makes it hard to identify the sender and the receiver.It is hard to track the amount of money that is sent through thesystem (Faith, 2011). Perhaps, the documentation would have made iteasier to track the funds. The circumstances have facilitated moneylaundering and the terrorist financing. With the increased war onterrorism, the scenario will undermine the measures that the nationhas placed towards stopping the activities of the terrorists aroundthe world (Faith, 2011). The absence of the appropriate regulatorymeasures has made the intervention more impractical, and that hasfacilitated the terrorist activities and the money laundering too.Another challenge that an anti-terrorist funding expert faces is theway that the legal system does not have any provisions that give roomfor surveillance. Hence, any measures or attempts to track the fundswill be at odds with the existing laws and the financial regulationsin the nations (Faith, 2011). Perhaps, if the hawala system waslegal, the surveillance of the funds and detecting the owners will bea bit easier. Increasing the overregulation or even increasing thecoercive measures will even push more people into using the hawalasystem. The fact that they have existed for a longer time now, theissue of eliminating the system will be impractical. The U.S.Treasury Department should simply prevent the misuse of the approachto ensure that everything is in the required place. All in all, themission of detecting the funds that move through the hawala system isimpossible because of the secrecy that the users maintain whilemoving the money.

As an individual, it will be hard to detect the funds that will movethrough the hawala system since the transfer does not leave behindany paper trail. In fact, the electronic surveillance will not have aproper impact on the transfer since it involves people mostly.However, tracking the funds will need to increase the number humanintelligence resources that will take their time to understand howthe system operates and the people that are using it (Rusten, 2011).In the process, they will be able to identify the source and thereceiver within a very short time and devise various ways of stoppingthem from undertaking such activities. However, the solution will beonly effective in the short run, and that will not make a greatimpact in the sector as expected. For instance, the government shouldallow the hawala system to flourish in the nation. The approach willmake the system legal and that will give the US government a chanceto tax the system. Through the taxation, the US government will beable to monitor and track every activity in the system (Rusten,2011). The approach will also give a chance for the properdocumentation of each transaction being made. In this case, this willbe a long-term solution that will aim at making the hawala systempublic as opposed to its current secret nature. The anti-terroristfunding experts will be able to counter the transaction patterns andstop the money before it reaches its destination. The ability tomonitor and regulate the hawala system will scare the terrorists fromusing it and they will find other options (Rusten, 2011). In fact, itwill reduce the rate of terrorist activities in the US and give thegovernment enough time to find a solution to the problem and otherinformal systems that they might use.


In conclusion, the hawala system is a challenge to mostanti-terrorist funding experts because of the secrecy it maintainsand controlling it will need a proper surveillance consisting ofhuman intelligence or even making the system legal and allow taxationso as to monitor it easily. In this case, the secrecy and theunderground nature of the system are clearly a problem and show theneed for immediate measures that will prevent any furtherconsequences. For instance, its secrecy nature has promoted theterrorist activities that rely on such circumstances to flourish.Hence, increasing the human intelligence to interact with thesuspects will track how the money moves and undermine its operations.In the long-run, the government should try in making the system legaland encourage more people to use it. In the process, the governmentwill find it easy in organizing the taxation and monitoring how thefunds move.


Faith, D. C. (2011).The Hawala System. Global Security Studies, 2(1),23-33.

Rusten Wang, J. (2011). Regulating Hawala: A Comparison of FiveNational Approaches. Journal of Money Laundering Control,14(3), 210-224.

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