NCJ Number
197679
Journal
Journal of Contemporary Criminal Justice Volume: 18 Issue: 4 Dated: November 2002 Pages: 358-369
Date Published
November 2002
Length
12 pages
Annotation
This article describes Indian, Pakistani, and Chinese underground banking systems, and discusses the use of underground banking schemes by terrorist groups.
Abstract
The Indian underground bank scheme described is called the Hawala system, which is derived from an Arabic word that means the transfer of money or information between two persons by using a third person. Transactions made by the hawala banker on behalf of a client are complex and require an understanding of the network, which spans the globe. The banker needs to know who wants what, where, and how much his clients' needs differ. Because the system is based on trust, the debits and credits on the books of bankers in an underground network are balanced when reverse transactions are made. Pakistani underground banking is known as the Hundi system , but the terms " hundi" and "hawala" are interchangeable. The underground banking systems in place in Pakistan today were strongly affected by political events in Afghanistan when the Russians invaded the country. Narcotics swaps for arms required the use of underground banking. By almost every estimate, the Golden Triangle's finances have been managed by ethnic Teochieu Chinese through underground banking networks. Record-keeping procedures of this system are virtually nonexistent. The transaction is fully coded messages. The system has the capability of transferring funds from one country to another in a matter of hours, provides complete anonymity for the customer, guarantees total security, converts gold or other items into currency, and converts one currency into another of the customer's choice. It has been assumed, if not proven, that the Al Qaeda terrorist group uses underground banking networks to further its cause. The lengthy historical roots of underground banking testify to its effectiveness in breaching government efforts to track or eliminate it. Underground banking is frequently used to avoid taxation or government scrutiny, loss through the dangers associated with the physical movement of valuables across distances, and as a means of disguising the proceeds of crime. 6 notes and 15 references