Problems in regulating Hawala.

Hawala is a form of informal banking system in the Indian subcontinent and parts of the Middle-East. In the aftermath of Sept. 11 attacks there have been calls for closing and/ regulating informal banking systems in Africa, Asia and other parts of the globe for the growing concerns about terrorism funding. There have been some successful efforts to do especially in the African region, but it is nearly impossible to regulate Hawala system in India because of the legitimate socio-economic purposes that it serves. It enjoys extensive public patronage both from Indians in India and those living abroad. It is also a preferred means of money transfer for many corrupt politicians, bureaucrats and businessmen. Since 1990s, it has become a dirty word, but the business in itself has been flourishing. There have been numerous incidents of the system being abused by organized crime groups and terrorists as well. Despite these abuses Hawala has been decriminalized and brought under the purview of civil law in India. It is due to a number of factors including inadequate banking infrastructure, poor perception of law and order, high levels of political corruption and economic crimes, as well as strong family and community ties that perpetuate use of Hawala. The data for the paper was collected from Hawala operators and customers in Delhi and Punjab in India, law enforcement officers, journal articles and news report. [ABSTRACT FROM AUTHOR]