Lifestyle & Belief

Religious-based banking under scrutiny in Pakistan

Hawalla has been standard practice in Pakistan for hundreds of years but just this month the Pakistani government is moving to shut it down. It accuses the country's largest money exchanging company of moving ten billion dollars out of the country illegally through the Hawalla system. Hawalla is much like any Western money transform system in its most basic form, but what's unique is transactions take place entirely through the honor system and no records are kept of individual transactions. This banker says Hawalla is the perfect system for individuals who want to avoid taxes or detection. He estimates that 20% of money transfers in and out of Pakistan are done through Hawalla so he's happy to see the government crack down on the practice. Pakistan isn't worried that Hawalla is financing terror, but rather that the government fears the system is being used to cipher hard currency out of the country. The government has offered amnesty for those using Hawalla but others are worried over-zealous law enforcement agencies might still make arrests. This finance professor says Hawalla itself isn't illegal as long as records are kept but the government hasn't held bankers accountable. But he won't come right out and say what many believes: that Hawalla exists because corrupt politicians let it happen. So the move to clean up the system may also be based on pressure from the U.S. government which is concerned about how easy it is for terrorists to move money around the world.

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