The Impact Of Hawala On The Middle East, North Africa, South Asia

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Hawala Hawala is a money transferring system that’s used in places such as the Middle East, North Africa, South Asia, and the idea is that a group of money brokers (Hawala dealers) rely solely on the honor system to transfer large amounts of money between two places, or people, without raising any red flags when it comes to law enforcement. As you can imagine, criminals have been able to take advantage of this system to escape traditional banking methods. Hawala is a method of transferring money without any actual movement of money to an intended destination. Hawala is subject to little or no paper and electronic trail because the system is solely based on the trust and honor of another human being and there is no traceable money from the…show more content…
To exchange banking transactions, each financial institution and bank must have a banking relationship by either being a bank or affiliating itself with one in order to enjoy the much sought-after business features. C.H.I.P.S C.H.I.P.S stands for Clearing House Interbank Payment System. It’s a real-time multilevel payment system. CHIPS handle more than 95% of US dollar foreign exchange payments and are subject to paper and electronic trail due to the fact that the money can be traced. In one day, CHIPS settles 1.5 trillion dollars and currently CHIPS has a network of 50 Bank participants worldwide. Here is an example of the working process for CHIPS: Client A purchases goods from client B and client B requests for the payment. Therefore client A calls his bank and says “I need to pay 1 million dollars to client B”, and he gives the bank 1 million dollars. Now, client A’s bank has to transfer 1 million dollars to client B’s bank. How does client A’s bank transfer the money to client B’s bank, you may ask? Well the answer is through CHIPS. CHIPS will open a CHIPS account for each participant (client A and client B) and the CHIPS account consists of a primary account and supplemental account. The primary account is a funding requirement for each participant and the supplemental account is the account for the payment. In this case referring to the example, client A’s Bank will transfer the money into his CHIPS

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