Regulating Hawala: Thwarting Terrorism or Jeopardizing Stability?

NPS-CHDS master’s graduate Monika Mali (MA1803/1804), Transportation Security Inspector at the Transportation Security Administration, talks about her thesis which uses the case study method to investigate the unintended consequences that have resulted from the United States’ efforts to deter criminal abuses of hawala. It explores the illegitimate and legitimate uses of hawala in Africa and the Middle East in the post-9/11 era. Despite extensive regulatory blocks, hawala has been a key financial node for the Taliban, Islamic State, and al-Shabaab. On the other hand, hawala serves as a lifeline for victims of terrorism in Africa and the Middle East. Any disruption in service jeopardizes their survival and protection. This study identifies how regulatory action has caused financial exclusion and is counterproductive to the United States’ anti-money laundering efforts and campaigns against terrorism financing. Practices like de-risking encourage the growth of alternative money transfer systems. This assessment concludes with a recommendation to use mobile money platforms to reinvigorate the formal financial sector and promote financial inclusion. Mobile hawalas are already leveraging digital delivery channels and have gained rapid momentum. In lieu of further regulatory action, Western institutions can employ these emerging technologies to transform into more adaptive and advantageous competitors of hawala and avoid compromising the essential service it provides.

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