Money Wars: Hawala and Its Use to Finance Terrorism

Diploma Thesis from the year 2004 in the subject Economics - Monetary theory and policy, grade: 2,0 (B), University of Freiburg (Institute for Economic Research), language: English, abstract: After the horrible attacks on September 11, 2001, an ancientinformal money transfer system called hawala came underscrutiny for its possible involvement in the financing. This bookexplores what other, similar informal transfer systems exist, andwhat their percentage of total remittances is. After an analysis ofits competitors, hawala is further explained through a sampletransaction, followed by an insight on its bookkeeping. Later theinstitutional framework is analyzed and, most important, itsconsiderable incentives to the customer are outlined. The work then tries to define the ideal characteristics of atransfer system in respect to terrorist financing and explores thecurrent and actual use of hawala to finance terrorism. How arethe necessary funds generated and moved? A brief outlook intothe future of terrorist financing will end this chapter. Being aware of the incentives to the regular customer as wellas to the terrorist organizations to use hawala , the major policiesto stop the financing of terrorism will be evaluated as to theirefficiency. Are they enough to dry up terrorist funding?