This paper reviews the main types of informal money transfer systems (IMTS). Developed centuries ago as a way to settle financial obligations, IMTS remain today the preferred remittance vehicle among migrant communities. Characteristics, such as low transactions costs, speed, and little paperwork, render them more attractive than banking institutions. After September 11, IMTS were suspected of being used for terrorist purposes, leading some to call for their prohibition. The authors think such a response is too drastic and instead propose measures to make IMTS less prone to possible abuse by criminal elements and encourage the development of formal sector alternatives.

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