^aDepartment of Defence Management and Security Analysis, Cranfield University, Defence Academy of the United Kingdom, U.K. E-mail: skeene.cu@defenceacademy.mod.uk

Abstract

The 9/11 attacks in the U.S.A. not only brought terrorism to the top of the political agenda for the U.S.A. and its allies, but also highlighted the importance of tackling terrorist finance. As the interest in terrorist financing methods increased, the subject of hawala and related informal value transfer systems (IVTS) has received much negative attention. Much suspicion has been generated, partly due to the lack of transparency, which makes following the money trail challenging for financial investigators. However, most of the negative perception has been derived from the general lack of understanding of IVTS. In an attempt to increase transparency, regulation has been recommended as a possible solution by policymakers and researchers. However, there is much debate among practitioners as to the true effectiveness of regulation. This paper aims to develop a better understanding of IVTS to establish whether the perceived threat and misuse of IVTS can be justified.