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Querist : Anonymous
Querist :
Anonymous
(Querist)
16 May 2010
wht is hawala transactions can u explain me with one example.
16 May 2010
Hawala is an Islamic way of transferring money from one place to another.
Not only transfers which are against public policy are done through hawaladars, but the avoidance of government control (For tax dodging, money laundering, weapons brokering, child prostitution and funding terrorism) is an important reason the system has survived in these days of Western Union and other wire transfer systems.
In Hawala, the sender goes to a hawaladar in his city and gives him a sum of money for someone in another city or even country. The hawaladar calls another in the destination city and tells him to give the sum to the recipient. At the end of a set period, the two hawaladars tally up how much each of them has recieved from, and paid out on behalf of, the other, and the settle the debt.
It's very popular with criminals because the hawaladars keep no individual records of the transactions - only a running total of the amount owed - which keeps the sender and receiver anonymous.
Not only transfers which are against public policy are done through hawaladars, but the avoidance of government control (For tax dodging, money laundering, weapons brokering, child prostitution and funding terrorism) is an important reason the system has survived in these days of Western Union and other wire transfer systems.
In Hawala, the sender goes to a hawaladar in his city and gives him a sum of money for someone in another city or even country. The hawaladar calls another in the destination city and tells him to give the sum to the recipient. At the end of a set period, the two hawaladars tally up how much each of them has recieved from, and paid out on behalf of, the other, and the settle the debt.
It's very popular with criminals because the hawaladars keep no individual records of the transactions - only a running total of the amount owed - which keeps the sender and receiver anonymous.
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16 May 2010
How does the system work?
An initial transaction can be a remittance from a customer (CA) from country A, or a payment arising from some prior obligation, to another customer (CB) in country B. A hawaladar from country A (HA) receives funds in one currency from CA and, in return, gives CA a code for authentication purposes. He then instructs his country B correspondent (HB) to deliver an equivalent amount in the local currency to a designated beneficiary (CB), who needs to disclose the code to receive the funds. HA can be remunerated by charging a fee or through an exchange rate spread. After the remittance, HA has a liability to HB, and the settlement of their positions is made by various means, either financial or goods and services. Their positions can also be transferred to other intermediaries, who can assume and consolidate the initial positions and settle at wholesale or multilateral levels.
The settlement of the liability position of HA vis-Ã*-vis HB that was created by the initial transaction can be done through imports of goods or "reverse hawala." A reverse hawala transaction is often used for investment purposes or to cover travel, medical, or education expenses from a developing country. In a country subject to foreign exchange and capital controls, a customer (XB) interested in transferring funds abroad for, in this case, university tuition fees, provides local currency to HB and requests that the equivalent amount be made available to the customer's son (XA) in another country (A). Customers are not aware if the transaction they initiate is a hawala or a reverse hawala transaction. HB may use HA directly if funds are needed by XB in country A or indirectly by asking him to use another correspondent in another country, where funds are expected to be delivered. A reverse hawala transaction does not necessarily imply that the settlement transaction has to involve the same hawaladars; it could involve other hawaladars and be tied to a different transaction. Therefore, it can be simple or complex. Furthermore, the settlement can also take place through import transactions. For instance, HA would settle his debt by financing exports to country B, where HB could be the importer or an intermediary.
An initial transaction can be a remittance from a customer (CA) from country A, or a payment arising from some prior obligation, to another customer (CB) in country B. A hawaladar from country A (HA) receives funds in one currency from CA and, in return, gives CA a code for authentication purposes. He then instructs his country B correspondent (HB) to deliver an equivalent amount in the local currency to a designated beneficiary (CB), who needs to disclose the code to receive the funds. HA can be remunerated by charging a fee or through an exchange rate spread. After the remittance, HA has a liability to HB, and the settlement of their positions is made by various means, either financial or goods and services. Their positions can also be transferred to other intermediaries, who can assume and consolidate the initial positions and settle at wholesale or multilateral levels.
The settlement of the liability position of HA vis-Ã*-vis HB that was created by the initial transaction can be done through imports of goods or "reverse hawala." A reverse hawala transaction is often used for investment purposes or to cover travel, medical, or education expenses from a developing country. In a country subject to foreign exchange and capital controls, a customer (XB) interested in transferring funds abroad for, in this case, university tuition fees, provides local currency to HB and requests that the equivalent amount be made available to the customer's son (XA) in another country (A). Customers are not aware if the transaction they initiate is a hawala or a reverse hawala transaction. HB may use HA directly if funds are needed by XB in country A or indirectly by asking him to use another correspondent in another country, where funds are expected to be delivered. A reverse hawala transaction does not necessarily imply that the settlement transaction has to involve the same hawaladars; it could involve other hawaladars and be tied to a different transaction. Therefore, it can be simple or complex. Furthermore, the settlement can also take place through import transactions. For instance, HA would settle his debt by financing exports to country B, where HB could be the importer or an intermediary.
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