Informal value transfer system

Informal value transfer system

An informal value transfer system (IVTS) refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form. Informal value transfers generally take place outside of the conventional banking system through non-bank financial institutions or other business entities whose primary business activity may not be the transmission of money. The IVTS transactions occasionally interconnect with formal banking systems, for example, through the use of bank accounts held by the IVTS operator.

History of IVTS

IVTS, including so-called alternative remittance and underground banking systems, pre-date western banking systems and existed as far back as 5800 BC. The systems were established originally on the Indian subcontinent in Asia as a means of settling accounts within villages. Their use as global networks for financial transactions spread as expatriates from the original countries settled abroad. Today, IVTS operations are found in most countries. Depending on the ethnic group, IVTS are called by a variety of names including, for example, "hawala" (Middle East, Afghanistan, Pakistan); "hundi" (India); "fei ch’ien" (China); "phoe kuan" (Thailand); and "Black Market Peso Exchange" (South America).

Individuals or groups engaged in operating IVTS may do so on a full-time, part-time, or ad hoc basis. They may work independently, or as part of a multi-person network. IVTS are based on trust. Historically, operators have not, as a general rule, misappropriated the funds entrusted to them.

How does IVTS work?

The sender gives money to an IVTS agent (usually in an ethnic neighborhood) and his/her counterpart in the receiver region/country acts as deliverer of this money. Sender calls or faxes instructions to his counterpart and the money gets delivered in a matter of few hours. Settlements aremade either with a private courier or wire transfer in the opposite direction. Another method of balancing the books is to under-invoice goods shipped abroad, so that the receiver can resell the products at a higher market price. [cite web| year =2003|url=http://www.foreignpolicy.com/users/login.php?story_id=191&URL=http://www.foreignpolicy.com/story/cms.php?story_id=191| title =Migration's New Payoff| format =PDF| pages =9| publisher=Foreign Policy| accessdate =June 22| accessyear =2007]

Use of IVTS

IVTS are utilized by a variety of individuals, businesses, and even governments to remit funds domestically and abroad. Expatriates and immigrants often use IVTS to send money back to their families and friends in their home countries. IVTS operations are also used by legitimate companies, traders, and government agencies needing to conduct business in countries with no or inadequate formal financial systems.

In some countries, IVTS-type networks operate in parallel with formal financial institutions or as a substitute or alternative for them. Besides citizens of the US, persons (legally or illegally) residing in the US from foreign countries and individuals living in other nations may prefer or need to use IVTS in lieu of formal financial institutions for various reasons as described below:
* the constant change in the political environments, unsatisfiable payment systems, and/or a rapid continuously changing financial sector that exist within a country;
* a lack of easily accessible formal financial institutions in remote areas of some countries;
* transfers that are more efficient, reliable, and cheaper than formal financial institutions. (For example, a wire transfer of funds using banks involves fees charged to the sender and receiver, may take from two to seven days to complete, and may be delayed or lost. Funds moved through IVTS are available within 24 hours, with minimal or no fees charged to the participants.);
* to avoid paying higher foreign exchange rates. (Funds sent through traditional transfers are converted to the currency of the recipient’s country; the fee charged for exchange rate conversion is set by the institution. IVTS operators, who speculate in currency exchange rates, charge lower fees.);
* to avoid paying taxes;
* to ensure anonymity since there may be minimal or no records maintained; in other words, no paper trail exists; or
* to avoid mandatory reporting of large transactions from financial institutions to governments.

Because IVTS provides security, anonymity, and versatility to the user, the systems can be also be used for supplying resources for doing illegal activities. Following the September 11, 2001 attacks on the United States, IVTS have come under increased scrutiny and regulation in many countries under pressure from the United States.

References

[http://www.fincen.gov/advis33.pdf U.S. Dept. of the Treasury March 2003 Advisory (#33) to financial institutions re IVTS.] "Almost all of this article comes from this document."

External Sources

Hawala. An Informal Payment System and Its Use to Finance Terrorism von Sebastian R. Müller (Broschiert - Dez. 2006), ISBN: ISBN-10: 3865506569, ISBN-13: 978-3865506566

ee also

*Value transfer system


Wikimedia Foundation. 2010.

Игры ⚽ Нужна курсовая?

Look at other dictionaries:

  • Value transfer system — A value transfer system refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same… …   Wikipedia

  • Honor system — An honor system or honesty system is a philosophical way of running a variety of endeavors based on trust, honor, and honesty. Something that operates under the rule of the honor system is usually something that does not have strictly enforced… …   Wikipedia

  • Informal learning — Definition= Combs (1985) defines informal learning as the spontaneous, unstructured learning that goes on daily in the home and neighborhood, behind the school and on the play field, in the workplace, marketplace, library and museum, and through… …   Wikipedia

  • First Solution Money Transfer — Infobox company name = First Solution Money Transfer type = Private foundation = 2004 location city = London location country = UK locations = 41 branches, 100+ agents key people = Dr Fazal Mahmoud (Chairman) Gulam Rabbani Rumi (Director) Shah… …   Wikipedia

  • USA PATRIOT Act, Title III, Subtitle B — The USA PATRIOT Act was passed by the United States Congress in 2001 as a response to the September 11, 2001 attacks. It has ten titles, with the third title ( Title III: International Money Laundering Abatement and Financial Anti Terrorism Act… …   Wikipedia

  • CIA transnational anti-terrorism activities — This article deals with activities of the U.S. Central Intelligence Agency (CIA) related to terrorism. Especially after the CIA lost its coordinating role over the entire Intelligence Community (IC), it is impossible to understand US… …   Wikipedia

  • Electoral system of Australia — This article is about elections to the Australian Parliament. For elections to Australian states and territories, see Electoral systems of the Australian states and territories. For the method of voting known as the Australian ballot, see Secret… …   Wikipedia

  • The Wright System — Rules and procedures for a Reiterative Proportional Single Transferable Vote Computerised Count The Wright system (named after the late Jack Wright, author of the Book Mirror of a Nation s Mind and past President of the Proportional… …   Wikipedia

  • Federal Reserve System — FRB and FED redirect here. For other uses, see FRB (disambiguation) and FED (disambiguation). Federal Reserve System …   Wikipedia

  • Hawala — (also known as hundi) is an informal value transfer system based on performance and honor of a huge network of money brokers which are primarily located in the Middle East, Africa and Asia.OriginsHawala has its origins in classical Islamic law,… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”