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Regulating and Combating Underground Banking

Criminal Law Forum, Vol. 20, pp. 97-111, 2009

1 Pages Posted: 11 Mar 2009  

Matthias J. Borgers

VU University Amsterdam

Date Written: March 9, 2009


In combating and regulating underground banking, a choice can be made of roughly two models, the risk model and the assimilation model. The risk model comes down to a complete prohibition of underground banking combined with an active investigation and prosecution policy. In the assimilation model, underground banking is recognised as a form of financial services but at the same time, all rules that generally apply to financial services are declared applicable to underground bankers. An effort is made simultaneously to lower the threshold of the formal banking system. The international recommendations and legislation - in particular of the Financial Action Task Force and the European Union - take the assimilation model as their starting point, albeit that no or hardly any attention is paid to the role of the formal banking system. With that, relatively little account is taken as yet in the international community of the historic and socio-economic backgrounds of informal banking systems, their embedment in different cultures and the advantages of the services offered.

Keywords: criminal law, underground banking, hawala

JEL Classification: K14

Suggested Citation

Borgers, Matthias J., Regulating and Combating Underground Banking (March 9, 2009). Criminal Law Forum, Vol. 20, pp. 97-111, 2009. Available at SSRN:

Matthias J. Borgers (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
1081 HV Amsterdam

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