Coalitions of reciprocity and the maintenance of financial integrity within informal value transmission systems: The operational dynamics of contemporary hawala networks

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Abstract

A comprehensive overview of the development of contemporary IVTS networks operating within a hawala format, exploring the way in which coalitions of reciprocity are utilized to underwrite system security within such networks, such that they work smoothly and efficiently despite the absence of external administrative and legal regulation. Challenging widespread fears that such networks are acutely vulnerable to the financiers of terrorism and those repatriating the profits of drug smuggling, the paper concludes that coalitions of reciprocity owe their competitive advantage over formally consituted banks not because of their inherent criminality, but because they provide a more cost-effective means of facilitating long-distance value-transmission than the sclerotic and top-heavy administrative procedures routinely deployed by their competitors.