Hawala, and you
Leave it alone.
One of the new words that Americans are learning — thanks to the Somali fraud in Minnesota — is “hawala”.
As any long-term reader of either this blog, or the old one, has probably figured out, hawala is nothing new to me. Hawala, along with bribery and the black/grey market, is one of the things you just internalize if you’re living in the Third World, particularly the Middle East and Africa; and I have actually used the hawala system in the past1.
Hawala is a money transfer system that is older than the banking system, relies heavily on trust, and is functionally untraceable.2
The concept is simple.
Let’s say that I am in Graustarkistan, doing Ian things, and I develop a need for $2100 US dollars.
I contact my brother (who isn’t even on the same continent as Graustarkistan) and he wanders over to the local hawaladar — as a creative articulation we will call him Suleiman bin Suleiman — has several glasses of tea, and during the course of the conversation, mentions that he has need to send money to Graustarkistan. He gives Suleiman the $2100, plus a fee of between 3% and 5%3, either a name or a description, and some sort of security check.
The security check can be a verbal or written passcode, a physical token, or anything that Chris feels will be sufficient to guarantee that the $2100 goes to me, and not Abdul the Moderately Rabid — let us posit that Chris is feeling a little traditional, so he gives Suleiman a poem.
Suleiman gives Chris the name of a hawaladar in Djellibeen, the capital city of Graustarkistan. For creativities sake, we’ll call him Raschid.
Chris then contacts me with the title of the poem, along with the name “Raschid”.
When the envelope arrives, I pop over to the souk, find Raschid, introduce myself, drink waaaay too many glasses of tea, and at the polite time during the conversation, he would mention something along the lines of, “I say to you: ‘Mary had a little lamb, she fed it castor oil’.”
To which I would reply, “And every time it jumped the fence, it fertilized the soil.”4
Voila — he hands me $2100.
Since Raschid doesn’t know me from Adam’s off ox, I have to give him a 5% handling fee, and I’m out the door with my cash.
“Ian,” I hear you say, “How does Raschid get his money from Suleiman?”
That’s the genius part. In countries where hawala has been practiced for literally thousands of years, there are multiple hawaladars within a day’s journey who have been sending money the other way, and thus owe Suleiman.
Hypothetically, let us say that Suleiman contacts three hawaladars who owe him money, and simply tells each one, “Hey, take $700 out of what you owe me, and send it to Raschid.”
Non-hypothetically, hawaladar families have been doing this for centuries, keep meticulous ledgers, and what is owed to Raschid by Suleiman is often paid as much through gold, stocks, favours, trade and suchlike, as cash.
I consider it an elegant, beautiful system. It is anonymous, untraceable, and keeps prying Government eyes out of my sodding business.
Unfortunately, humans being humans, hawala is used for distinctly unpleasant ends. It does, in fact, fund terrorism and other unsavoury practices.
However, while that is an unfortunate side-effect, I don’t consider it reason enough to do away with the anonymity and freedom from intrusive government officials that hawala provides.
In the US — seeing as we are a young, and barbaric land — hawala isn’t as widespread or as entrenched as other, older, more civilised lands; and the web of hawaladars, centuries of ledgers, and hard-earned trust simply aren’t present — so bags of cash, unfortunately, have to be couriered back and forth.
Which is just … messy. And primitive. Bloody uncouth, really.
Anyhoo, that’s a brief overview of the hawala system. I consider it to be an elegant, anonymous solution to transferring money, but I also can see why it might rustle some jimmies.
Ian
Yes. Your shocked face.
The actual reason governments hate it.
Depending on how much business he does with the hawaladar. Knowing Chris, if he ever paid more than 3% on any transaction I’ll be mortally shocked.
Hypothetically, insert fifteen minutes of Old Jewish Dude giggling here. Some humour crosses cultures.
I suspect that Hawala is one of those things that if it didn’t exist, someone would have to invent it. I also suspect that the Knights Templar modified the idea for their own usa.
Sounds a lot like the original system set up by the Templars at the time of the crusades to protect pilgrims from being robbed on their way to the holy lands.