Western Unionizing the Hawala: The Privatization of Hawalas and Lender Liability

Nakhasi, Smriti S. | January 1, 2007

Hawala, an ancient banking system used predominantly in South Asia and the Middle East, has recently posed a regulatory quandary for law enforcement and capital markets.1 This comment addresses the pitfalls of a prominently proposed, well-intentioned solution to bring the hawala system into the modern banking structure and under the regulatory eye of law enforcement. As will be seen, the inherent nature of the hawala system and the lender risks associated with privatizing create enormous obstacles to realizing these privatization efforts. The problem with many proposed solutions is that they try to impose guidelines upon a system based on cultural, religious, and consumer needs that vary from those recognized by the hegemonic political economic structure.