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Mideast's ancient hawala system: follow the flow of migrant money

Published January 28th, 2016 - 03:17 GMT

Hawala is the main means by which migrants move money, a system that enables users to transfer cash via an ancient compact founded solely on trust. It’s use has expanded with the millions of MidEast migrants moving towards the EU since the start of the Syrian conflict.

It’s banking at it’s simplest, devised by medieval tradesmen who needed to outsmart highway robbers on the dangerous Silk and Spice Roads. The same benefits apply today to migrants crossing international borders. While it could serve criminal activity, experts maintain that’s a tiny fraction of all hawala transactions.

As in antiquity, it operates off-the-books and under-the-radar of governments, tax collectors, and institutional banks. It’s not totally unlike today’s peer-to-peer transactions using digital currency like Bitcoin or Litecoin, which some believe will soon be used in halawa. When it comes to commerce, cutting out the middle man never gets old.

 
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moving money across borders

Hawala is an ancient trust-based system of money transfer that leaves no paper trail and works outside traditional banking protocols. It evolved to enable trade between distant places where conventional banking instruments were weak or nonexistent. Today the world’s “guest workers” use it to send an estimated $390 bil a year back home.

arab hawaladar

Hawala - which means “transfer” in Arabic - was widely adopted by medieval traders to fund transactions without sending money along commercial routes that threaded through treacherous territory. Think of the ancient Spice and Silk Roads. Modern users tend to be people with no bank accounts, ATM or credit cards.

Middle Eastern migrants

It’s become the main banking method for Middle Eastern migrants; low transaction fees and cultural familiarity underpin its ballooning popularity.Transfers are quick. Cash is available within 48 hours and can reach rural and remote places. Interpol defines it as "money transfer without money movement."

how hawala works

It works like this. A customer gives cash to a hawala broker (or hawaladar) in one city to be transferred to a recipient in another location. They agree a password that will permit the end payout. Hawaladar #1 calls hawaladar #2 in the recipient's city, informs #2 as to the password, and relays any other instructions for releasing funds.

refugee money flow

The customer informs the intended recipient about the password, which can be a number or a unique secret token such as a specific piece of jewelry or a photo. The recipient meets hawaladar #2, discloses the password, and collects the sum, minus a commission that averages about 5% of total transfer value.

It’s all about trust. Hawaladar #1 now owes hawaladar #2 for the money paid out, and must trust that the debt will be settled. Promissory notes are not exchanged and hawala disputes fall outside the law. Trust is bolstered by family relations and tribal affiliations. Fraud is rare as an unscrupulous hawaladar loses credibility and reputation.

It’s all about trust. Hawaladar #1 now owes hawaladar #2 for the money paid out, and must trust that the debt will be settled. Promissory notes are not exchanged and hawala disputes fall outside the law. Trust is bolstered by family relations and tribal affiliations. Fraud is rare as an unscrupulous hawaladar loses credibility and reputation.

Hawala brokers periodically settle up debts via direct cash transactions, or a swap of properties, goods, and services. Operating costs are low as brokers don’t pay registration and compliance fees that established agents like Western Union do. They also set their own currency exchange rates, further padding profits.

Hawala brokers periodically settle up debts via direct cash transactions, or a swap of properties, goods, and services. Operating costs are low as brokers don’t pay registration and compliance fees that established agents like Western Union do. They also set their own currency exchange rates, further padding profits.

Hawala is perfectly suited to the millions of Middle Eastern refugees entering the EU with a just a backpack of belongings, which nearly always includes a smartphone. Skype, Viber and WhatsApp allow people to tap into WiFi hotspots to arrange transactions.

Hawala is perfectly suited to the millions of Middle Eastern refugees entering the EU with a just a backpack of belongings, which nearly always includes a smartphone. Skype, Viber and WhatsApp allow people to tap into WiFi hotspots to arrange transactions.

flow of syrian refugees

The WSJ reported 90% of transactions in the EU human traffic trade (valued at around $2.5 bil a year) use hawala. It moves billions more to developing nations as workers send wages home. Hawala is maximally flexible in that sums can be redeemed in multiple currencies, paid in-full on-demand or as per client-defined pay-out stages.

Hawala is big business in Turkey, with Istanbul and Izmir emerging as hawala hubs for incoming Syrians. Traffickers may help refugees escape home conflict, but any altruism is tainted by near-total disregard for health and safety and an underworld connection. Smugglers and halawadar both pay off police and crime gangs to sustain business.

Hawala is big business in Turkey, with Istanbul and Izmir emerging as hawala hubs for incoming Syrians. Traffickers may help refugees escape home conflict, but any altruism is tainted by near-total disregard for health and safety and an underworld connection. Smugglers and halawadar both pay off police and crime gangs to sustain business.

hawala and terror

Hawala systems have been suspect since the 9/11 terror attacks. In 2010, Faisal Shahzad, who planted a car bomb in New York’s Times Square, admitted to using hawala to finance his caper. In 2015, the UN tagged hawala as a key part of the ISIS financial structure. But experts say criminal activity forms just a fraction of overall hawala transfers.

As it did for the ancient traders, hawala reduces risks of robbery on cross-border treks. It's secure, as a third party holds the cash until the migrant arrives at a specific destination. And it's oddly akin to new internet "cryptocurrencies", such as Bitcoin, that allow fast peer-to-peer digital transactions without an intermediary.

As it did for the ancient traders, hawala reduces risks of robbery on cross-border treks. It's secure, as a third party holds the cash until the migrant arrives at a specific destination. And it's oddly akin to new internet "cryptocurrencies", such as Bitcoin, that allow fast peer-to-peer digital transactions without an intermediary.

moving money across borders
arab hawaladar
Middle Eastern migrants
how hawala works
refugee money flow
It’s all about trust. Hawaladar #1 now owes hawaladar #2 for the money paid out, and must trust that the debt will be settled. Promissory notes are not exchanged and hawala disputes fall outside the law. Trust is bolstered by family relations and tribal affiliations. Fraud is rare as an unscrupulous hawaladar loses credibility and reputation.
Hawala brokers periodically settle up debts via direct cash transactions, or a swap of properties, goods, and services. Operating costs are low as brokers don’t pay registration and compliance fees that established agents like Western Union do. They also set their own currency exchange rates, further padding profits.
Hawala is perfectly suited to the millions of Middle Eastern refugees entering the EU with a just a backpack of belongings, which nearly always includes a smartphone. Skype, Viber and WhatsApp allow people to tap into WiFi hotspots to arrange transactions.
flow of syrian refugees
Hawala is big business in Turkey, with Istanbul and Izmir emerging as hawala hubs for incoming Syrians. Traffickers may help refugees escape home conflict, but any altruism is tainted by near-total disregard for health and safety and an underworld connection. Smugglers and halawadar both pay off police and crime gangs to sustain business.
hawala and terror
As it did for the ancient traders, hawala reduces risks of robbery on cross-border treks. It's secure, as a third party holds the cash until the migrant arrives at a specific destination. And it's oddly akin to new internet "cryptocurrencies", such as Bitcoin, that allow fast peer-to-peer digital transactions without an intermediary.
moving money across borders
Hawala is an ancient trust-based system of money transfer that leaves no paper trail and works outside traditional banking protocols. It evolved to enable trade between distant places where conventional banking instruments were weak or nonexistent. Today the world’s “guest workers” use it to send an estimated $390 bil a year back home.
arab hawaladar
Hawala - which means “transfer” in Arabic - was widely adopted by medieval traders to fund transactions without sending money along commercial routes that threaded through treacherous territory. Think of the ancient Spice and Silk Roads. Modern users tend to be people with no bank accounts, ATM or credit cards.
Middle Eastern migrants
It’s become the main banking method for Middle Eastern migrants; low transaction fees and cultural familiarity underpin its ballooning popularity.Transfers are quick. Cash is available within 48 hours and can reach rural and remote places. Interpol defines it as "money transfer without money movement."
how hawala works
It works like this. A customer gives cash to a hawala broker (or hawaladar) in one city to be transferred to a recipient in another location. They agree a password that will permit the end payout. Hawaladar #1 calls hawaladar #2 in the recipient's city, informs #2 as to the password, and relays any other instructions for releasing funds.
refugee money flow
The customer informs the intended recipient about the password, which can be a number or a unique secret token such as a specific piece of jewelry or a photo. The recipient meets hawaladar #2, discloses the password, and collects the sum, minus a commission that averages about 5% of total transfer value.
It’s all about trust. Hawaladar #1 now owes hawaladar #2 for the money paid out, and must trust that the debt will be settled. Promissory notes are not exchanged and hawala disputes fall outside the law. Trust is bolstered by family relations and tribal affiliations. Fraud is rare as an unscrupulous hawaladar loses credibility and reputation.
It’s all about trust. Hawaladar #1 now owes hawaladar #2 for the money paid out, and must trust that the debt will be settled. Promissory notes are not exchanged and hawala disputes fall outside the law. Trust is bolstered by family relations and tribal affiliations. Fraud is rare as an unscrupulous hawaladar loses credibility and reputation.
Hawala brokers periodically settle up debts via direct cash transactions, or a swap of properties, goods, and services. Operating costs are low as brokers don’t pay registration and compliance fees that established agents like Western Union do. They also set their own currency exchange rates, further padding profits.
Hawala brokers periodically settle up debts via direct cash transactions, or a swap of properties, goods, and services. Operating costs are low as brokers don’t pay registration and compliance fees that established agents like Western Union do. They also set their own currency exchange rates, further padding profits.
Hawala is perfectly suited to the millions of Middle Eastern refugees entering the EU with a just a backpack of belongings, which nearly always includes a smartphone. Skype, Viber and WhatsApp allow people to tap into WiFi hotspots to arrange transactions.
Hawala is perfectly suited to the millions of Middle Eastern refugees entering the EU with a just a backpack of belongings, which nearly always includes a smartphone. Skype, Viber and WhatsApp allow people to tap into WiFi hotspots to arrange transactions.
flow of syrian refugees
The WSJ reported 90% of transactions in the EU human traffic trade (valued at around $2.5 bil a year) use hawala. It moves billions more to developing nations as workers send wages home. Hawala is maximally flexible in that sums can be redeemed in multiple currencies, paid in-full on-demand or as per client-defined pay-out stages.
Hawala is big business in Turkey, with Istanbul and Izmir emerging as hawala hubs for incoming Syrians. Traffickers may help refugees escape home conflict, but any altruism is tainted by near-total disregard for health and safety and an underworld connection. Smugglers and halawadar both pay off police and crime gangs to sustain business.
Hawala is big business in Turkey, with Istanbul and Izmir emerging as hawala hubs for incoming Syrians. Traffickers may help refugees escape home conflict, but any altruism is tainted by near-total disregard for health and safety and an underworld connection. Smugglers and halawadar both pay off police and crime gangs to sustain business.
hawala and terror
Hawala systems have been suspect since the 9/11 terror attacks. In 2010, Faisal Shahzad, who planted a car bomb in New York’s Times Square, admitted to using hawala to finance his caper. In 2015, the UN tagged hawala as a key part of the ISIS financial structure. But experts say criminal activity forms just a fraction of overall hawala transfers.
As it did for the ancient traders, hawala reduces risks of robbery on cross-border treks. It's secure, as a third party holds the cash until the migrant arrives at a specific destination. And it's oddly akin to new internet "cryptocurrencies", such as Bitcoin, that allow fast peer-to-peer digital transactions without an intermediary.
As it did for the ancient traders, hawala reduces risks of robbery on cross-border treks. It's secure, as a third party holds the cash until the migrant arrives at a specific destination. And it's oddly akin to new internet "cryptocurrencies", such as Bitcoin, that allow fast peer-to-peer digital transactions without an intermediary.

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