

Hawala: transferring money without actually moving it - Rod
http://en.wikipedia.org/wiki/Hawala

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g__g
The word is quite common in India. Here's a summary: Hawala transfers are
mostly done by the underworld people (read gangsters, mafia, mob etc.) The
most common application of hawala is in betting. In India, betting on sports
is illegal but there is a huge underground network that takes bets on sporting
fixtures(cricket being the fav.). To place a bet you have to know someone who
knows a bookie, you speak to the bookie, ask him what the going rates are and
place your bets without paying any initial money. If you lose you will be told
where to deliver the money, usually it'll be to an agent in your city. After
this agent has collected money from all losing parties, he is informed of all
the people who won their bets in that city, he then transfers the same money
to them, the difference between the two is the profit. This is just one
application. Here hawala is mostly organized money laundering, reading the
above comments I am surprised to see legal systems of practicing hawala.

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vamsee
At least in India, most forms of Hawala are illegal, as the money easily
escapes the tax net and can be quite helpful in transferring black money. But
that doesn't stop the practice from being quite rampant, and from what I know
from a friend, a surprisingly dependable way of transfer, in fact.

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csomar
I'm arabic and I can read this word!

In Tunisia, they offer this service in the Mailling System. You deposit money
to the nearest office and a fee of 1.5 DT (around $1) and you mention the
person to get it (with a code).

The other person also should go to the nearest office and can get the money
using his identity card and the code.

It made things easier, as here people can't easily get Credit Cards.

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abdulhaq
Hawala is based on the islamic financial system which does not allow lending
with interest, instead the lender must participate in the risk of the
business, taking his share of profit or loss. Under a form of hawala it was
possible to take a cheque from Morocco and have it cashed in China, long
before such a system was available in the West.

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nopassrecover
I don't know a lot about macroeconomics and this is a little off topic but
isn't the honour system principle what nations work with and how trade
deficits etc. emerge?

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patio11
This is essentially identical to what happens when I put cash in the ATM at
7-11 with instructions to wire with my local bank to a bank in Tokyo which
wires it to a bank in Washington which wires it to Bank of America in St.
Louis so that I can move it into my IRA.

The yen doesn't physically get shipped to America, either.

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plinkplonk
"The yen doesn't physically get shipped to America, either."

yeah I don't get the "without moving it" part either. With minor exceptions
money doesn't physically move in the mainstream financial system either. There
are many things that define hawala but "transfering money without moving it"
isn't one.

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known
Hawala flourishes in India because 85% of Indians do NOT have bank accounts.
<http://tinyurl.com/cj25dz>

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ahoyhere
Most of us know this service as Western Union (and their ilk).

Interesting historical basis, though.

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keopi
It's good to know not all banking institutions were destroyed :P

In seriousness, I wonder how much the credit crisis affected Hawala.

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kailashbadu
I don’t see how credit crisis affect would affect the system other than that
people have less money to send around.

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keopi
exactly. However, I was thinking more that has the credit crisis affected
enough individuals for it to affect this system as well. Meaning, do less
people use this now than before? It also makes me wonder, do some people trust
this system more than the well established one that most people use?

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abdulhaq
The difference is that you gave your money to the banks and expected them to
keep it safe. Instead, they took your deposit and lent it to underpaid
Americans to buy overpriced houses, in the hope of making lots of money for
themselves. With Hawala, the money is quickly picked up at the other end and
not lent out to whoever promises to pay the highest interest rate.

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DavidSJ
Many banks did not engage in the foolish investment practices we've been
hearing about, and yet their lending rates were substantially affected by the
credit crisis due to the ensuing market conditions: higher costs of borrowing,
higher perceived risks, less overall liquidity, lower trust in other parties,
etc.

No one is completely isolated from the effects of a credit crisis.

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known
India's Prime-Minister-In-Waiting, Advani is accused in Hawala scam.
<http://en.wikipedia.org/wiki/Hawala_scandal>

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FraaJad
That must some good crystal you are staring into..

The election started only 2 days back and will go on till may 13.

Advani is a PM aspirant, not a PM-in-waiting.

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known
<http://www.rediff.com/news/2006/dec/10advani.htm>

