Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search

 

Howard's End: An Invisible Money Network

While government officials in the West scour the records of banks and politicians introduce new laws to halt the flow of money used for terrorist activities, an ancient system of exchange which the West finds impossible to control is still used by hundreds of millions of people. Maree Howard writes.

Before banks were even a gleam in the eye of their inventors, the ancient world was using systems of exchange for trade between people.

The ancient Chinese used a system called "flying money" or fei-ch'ien. No questions asked, no names used and no trail for law enforcement to follow.

Much of the Arab world today also uses a far-reaching network of informal banking called hawala - the Arabic word for trust.

Although it is illegal in most countries these money-moving systems of exchange are so rooted and accepted in ancient cultures that they are still so widely used that people in the West do not seem to understand that their "banking system" is just a baby in world affairs.

Today, with nothing more than a telephone or fax machine, billions of dollars can be transferred around the world through hawala.

As investigators try to uncover the banking and brokerage money trail behind Osama bin Laden's Qaida terrorist alliance, the hawala system is ideal for transferring enough money to, say, meet living expenses, buy a house, or maybe, even get a pilot's license.

The nature of hawala makes tracking those exchanges almost impossible.

Through hawala, sums large and small are sent across the world on a handshake and code word. Records of transactions are kept only until the deal is completed, then they are destroyed.

The operation is very simple especially because no cash crosses any border or moves through an electronic transfer system - the places where officials are likely to spot the transaction or maintain a record of it.

Anyone can use hawala just by walking into a shop in a thousand cities in the Middle East or Asia, put down a stack of money and ask that the amount be transferred to a recipient in another country.

The sender does not have to provide their name or identify the recipient. Instead, they are given a code word which the sender passes to the recipient.

The code word is all the recipient needs to pick up the same amount of cash from an associate of the original trader at the other end.

Today, it takes no time at all - about as quick as it takes to make a couple of phone calls.

Usually, a five digit code-word is provided - a letter and four numbers - which the recipient takes to the associate in the recipients country. The code word is given and the money is handed over. Then the records are destroyed at both ends. It's as simple as that.

For centuries traders have used the system as a means of avoiding robbery. In ancient times a merchant who delivered goods received a certificate which could be exchanged for money when they returned home.

Millions of people working in foreign countries today, use the system as a convenient and inexpensive means of sending money home to their relatives. These people have no need to rely on the Western banking system, nor do they feel comfortable using it.

Trust is the essential quality of hawala with hundreds, thousands, and tens of thousands sent between family members.

The hawala merchant earns his living by taking a commission on each transaction. The bigger the transaction, the bigger the commission. Currency fluctuations also earn profit.

Western law enforcement officials know that this ancient money transfer system, used by drug traffickers, corrupt politicians and black markets, has been operating for centuries, but it is so accepted and recognised by other cultures that there is little they can do about it.


© Scoop Media

 
 
 
Top Scoops Headlines

 

Biden In Tokyo: Killing Strategic Ambiguity
Could it have been just another case of bumbling poor judgment, the mind softened as the mouth opened? A question was put to US President Joe Biden, visiting Tokyo and standing beside Japan’s Prime Minister Fumio Kishida: “You didn’t want to get involved in the Ukraine conflict militarily for obvious reasons. Are you willing to get involved militarily to defend Taiwan if it comes to that?” The answer: “Yes. That’s a commitment we made.”.. More>>

Dunne Speaks: Robertson's Budget Gamble On Treasury
The popular test of the success or failure of Grant Robertson’s fifth Budget will be its impact on the soaring cost of living. In today’s climate little else matters. Because governments come and governments go – about every six to seven years on average since 1945 – getting too focused on their long-term fiscal aspirations is often pointless... More>>

Keith Rankin: Liberal Democracy In The New Neonationalist Era: The Three 'O's
The proposed ‘New Zealand Income Insurance Scheme’ (‘the scheme’) has attracted strong debate among the more left-wing and liberal groupings, within New Zealand-Aotearoa. This debate should be seen as a positive rather than negative tension because of the opportunity to consider and learn from the implications and sharpen advocacy... More>>


Digitl: Infrastructure Commission wants digital strategy
Earlier this month Te Waihanga, New Zealand’s infrastructure commission, tabled its first Infrastructure Strategy: Rautaki Hanganga o Aotearoa. Te Waihanga describes its document as a road map for a thriving New Zealand... More>>


Binoy Kampmark: Leaking For Roe V Wade
The US Supreme Court Chief Justice was furious. For the first time in history, the raw judicial process of one of the most powerful, and opaque arms of government, had been exposed via media – at least in preliminary form. It resembled, in no negligible way, the publication by WikiLeaks of various drafts of the Trans-Pacific Partnership... More>>




The Conversation: Cheaper food comes with other costs – why cutting GST isn't the answer

As New Zealand considers the removal of the goods and services tax (GST) from food to reduce costs for low income households, advocates need to consider the impact cheap food has on the environment and whether there are better options to help struggling families... More>>