Regulating Hawala: a comparison of five national approaches
| DOI | https://doi.org/10.1108/13685201111147522 |
| Date | 19 July 2011 |
| Pages | 210-224 |
| Published date | 19 July 2011 |
| Author | Jonas Rusten Wang |
| Subject Matter | Accounting & finance |
Regulating Hawala: a comparison
of five national approaches
Jonas Rusten Wang
Peace Research Institute Oslo, Oslo, Norway
Abstract
Purpose – The aim of this paper is to compare the regulatory frameworks for informal remittance
systems in the UK, Germany, The Netherlands, Sweden and Norway.
Design/methodology/approach – This study evaluates the effects of the different regulatory
frameworks, in terms of level of control and quality of remittance services. It relies on reports from the
Financial Action Task Force (FATF), law enforcement and regulatory agencies and the World Bank.
It also draws heavily on academic literature and migrant household surveys.
Findings – There are major differences between the countries in how to regulate Hawala and other
informal remittance systems. Even though all countries have challenges in regulating this sector, it
seems that a simplified registration regime for money transfer operators is the most suitable option for
improving both the level of control and the quality of remittance services. Looking at regulatory
changes during the last decade, it appears that the national policies have converged towards a medium
level.
Originality/value – This paper contributes to the debate on Hawala regulation by empirically
evaluating how successful five different national policies have been. It also presents an updated
picture of national regulations by including changes incurred by the EU Payment Services Directive
(2007/64/EC), which was implemented in 2009 and 2010.
Keywords Banking,Money laundering, Laws and legislation,Financial control,Disadvantaged groups
Paper type Research paper
1. Introduction
The attention for informal remittance systems increased sharply after the 9/11 attacks
in 2001. The lack of government control with these systems has raised concerns about
the vulnerability with regard to terrorist financing, money laundering and other
financial crimes. Still, informal mechanisms seem to persist as they offer advantages in
terms of speed, price, accessibility and familiarity.
National authorities differ significantly in how they address money remittance
providers, in terms of the requirements they impose, how these are enforced and
sanctioned, and in the range of complementary policies. Some countries criminalize all
forms of informal remittance systems, others subject them to licensing or registration,
while some countries do not regulate them at all. This diversity is hardly fruitful and
might force informal businesses underground even when they are allowed to operate in
the open (Passas, 2006, p. 284).
This study compares the regulatory approach of five net remittance-sending
countries, namely the UK, Germany, The Netherlands, Sweden and Norway. It assesses
the level of control the national authorities have, as well as how efficient the market
functions for the consumers. In doing that, the study seeks to answer how the
regulators can strike a balance between combating the abuse of informal systems while
safeguarding their legitimate use. The term Hawala will for reasons of simplicity
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
JMLC
14,3
210
Journal of Money Laundering Control
Vol. 14 No. 3, 2011
pp. 210-224
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685201111147522
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