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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.


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