In many Eastern countries, informal money transfer systems have been in place for centuries. The Indian hawala system, for example, dates back to the 8th century. It allows individuals to transfer money across long distances without physically moving currency. The process is simple: a person gives money to a hawala broker in one location, and a corresponding amount is paid out by another broker in the destination. No paperwork, just trust.
Similarly, the Chinese Fei Ch’ien, or “flying money,” system has been used since the Tang and Song dynasties. These systems are deeply rooted in trust and personal networks, making them nearly impossible for outsiders to track. Despite their lack of regulation, they provide essential services, especially in regions with limited access to formal banking.
The Western Approach: Regulation and Paper Trails
In contrast, Western countries rely on formal banking systems and regulated financial institutions. Every transaction is documented, creating a clear paper trail. This system ensures transparency and accountability, but it can also be cumbersome and expensive. Regulations are in place to prevent money laundering and other illicit activities, but they can also slow down the transfer process and increase costs.
The Cultural Divide
The differences between these systems highlight a broader cultural divide. In the East, trust and personal relationships are paramount. These systems have thrived for centuries based on mutual trust and social networks. In the West, the emphasis is on regulation, documentation, and transparency. Each approach has its strengths and weaknesses, reflecting the unique needs and values of different cultures.
Challenges for Regulators
The existence of these informal systems poses significant challenges for regulators, particularly in Western countries. Efforts to monitor and control these systems often fall short due to the lack of documentation and the reliance on trust. Additionally, cultural sensitivities must be considered when attempting to regulate systems that are deeply ingrained in certain communities.
The Future of Money Transfers
As the world becomes increasingly interconnected, the clash between Eastern and Western money transfer systems will continue. Finding a balance between regulation and the practical needs of different communities is key. Both systems offer valuable lessons, and the future of global finance may lie in a hybrid approach that combines the best of both worlds?
When Trump accused Biden‘s camp, now Harris’s, of being funded by Chinese funds, western investigators denied it as there is or was no paper trail. Without a paper trail there is no case?
But what paper trail? When this set up is based on no paper trail! It has been for hundreds of years and is still followed meticulously. Sometimes even millions are transferred, especially in diamond world, without any paper trail, purely on the basis of trust. It is difficult for any westerner to believe this when paper has always been an essential component of the western systems.
