Pardee-CFLP-Remittances-TF-Report

ize the informal equal efforts to alter the age-old traditional networks, which successfullyresisted prohibitions and authoritarian regimes in the past” (Passas 2008,411). Passas suggests that compliance and transparency are more likely to occurif policymaking processes include the input of local hawaladars. As the localappeal of the hawala system is central to its resilience, “there must be incentivesin place for hawala dealers to register willingly with various national and internationalbodies” (Razavy 2005, 291). It is also important to consider competing legalparadigms and strive for their harmonization at local, national, and transnationallevels (Razavy 2005; Passas 2008).There is a growing recognition of the need for a contextual approach to the licensingand registration requirements of informal value transfer systems. For countrieswhere hawala-like networks exist alongside a functional formal financialsector, registration and record-keeping requirements have been suggested alongthe lines of FATF recommendations. In conflict-affected or post-conflict situations,formal banking systems may have broken down and supervisory capacity of thestate diminished. A nuanced and gradual approach to regulating the informalremittance sector has been recommended for such environments (El Qorchi,Maimbo, and Wilson 2003; Passas 2005, 221). In post-conflict Afghanistan, forexample, where the capacity of the Central Bank to exercise formal regulationsis extremely limited, the options for local hawaladars include self-regulationthrough a dealers association and existing business codes, or application of specialregulations through some degree of registration (although not licensing) andsome form of record-keeping and customer identification (Maimbo 2003, 17).Conflict-related insecurity sometimes also can result in an increased local scrutinyof remittance agents and transactions and lead to a greater compliance withinternational regulatory requirements, as the case of Somalia demonstrates.Omer and El Koury (2005) describe how post-conflict insecurity in Somalia ledto thorough screening and documentation practices of the staff and customers oflocal remittance agencies. Various types of written identifications, collaterals, andcommunity references were drawn upon by the Somali remittance entrepreneurs:“Their enforced innovativeness in protecting themselves against insecurity hasunknowingly brought them into compliance with the global sphere of financialregulations, particularly concerning the ‘know your customer’ and ‘know yourprocesses’ methods of anti-money laundering and terrorist financing regulations”(232). A flexible and locale-specific approach is therefore required when implementinganti-money laundering regulations in local remittance networks.Remittance Flows to Post-Conflict States: Perspectives on Human Security and Development 33