Word: hawala
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Dates: during 2001-2001
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ADAM COHEN has been covering the murky Osama bin Laden money trail and the way al-Qaeda funds itself. He's become an expert on the shadowy Islamic banking system called hawala, in which nothing is written down. Talk to him on Wednesday...
...Although Indian authorities have found Kashmiri militants making extensive use of the hawala system, funding terrorism is not a priority for the hawala dealers. The big money comes from defrauding trade regulations: An importer arranges with a supplier to charge a fraction of his real prices on an invoice, and pays the difference via hawala. Drug traffickers and corrupt officials also use the system for money laundering. "Hawala dealers don't care about where the money comes from or what it is being used for," says Ali. "They only concern themselves with the deal...
...only is there no paper trail, Ali's system avoids bank charges, transmission delays and foreign exchange regulations. All that hawala requires is trust. And that, ironically, is why it thrives in the underworld. No one cheats, Ali insists. And if they do? He looks a little shifty. "The small gain will not be worth the bigger price," he says. "You will lose respect, and for a man, honor is his most important asset." How about his life? Ali laughs. "Yes, if someone is very upset, he might want to kill the thief," he says. "But it seldom comes...
...industry's hub is the oil emirate of Dubai, home to many gangsters from both India and Pakistan who maintain legitimate enterprises there but also operate hawala networks. Dubai is a free trade zone with no limitations on the movement of goods or currency. In the absence of laws expressly prohibiting the practice of hawala, it is difficult to track and arrest the offenders. And since hawala does not affect the Dubai economy, and it's not a priority for local law enforcement...
...Hawala hurts the national economies of developing countries desperate for foreign exchange deposits, but every individual in the chain has the incentive of earning a commission. And that's what keeps the networks going. "People know that salaries cannot buy the good things," says Ali, one of thousands of operatives in an underground banking world that stretches from New York to Tokyo. "You need a little extra." Even at a cost of enabling crime and terrorism...