Hawala Banking

Hawala has been linked to a number of terrorist organisations including al qaeda and islamic state and has often been used in place of modern online banking systems with an estimated 258 9.

Hawala banking. This paper presents a description of the hawala also referred to as hundi alternative remittance system. It is an informal way of moving or transferring money based on verbal assurance. Hawala networks have been used since ancient times and today are widely found. It is best described as an alternative remittance system running in parallel with the established regulated banking system.

Because transactions are made outside the conventional banking system and all the regulations that come with it hawala has become infamous as an easy way to fund dangerous and suspicious activities. Hawala provides a fast and cost effective method for worldwide remittance of money or value particularly for persons who may be outside the reach of the traditional financial sector. In essence hawala is a transfer or remittance from one party to another without use of a formal financial institution such as a bank or money exchange and is in this sense an informal transaction. ح والة ḥawāla meaning transfer or sometimes trust also known as havaleh in persian and xawala or xawilaad in somali is a popular and informal value transfer system based not on the movement of cash or on telegraph or computer network wire transfers between banks but instead on the performance and honour of a huge network of money brokers known as hawaladars.

Hawala from arabic meaning transfer or hundi banking systems pose unique challenges to anti fraud investigators. Definition and meaning hawala is an ancient system for moving money that predates western banking practices the system is based on trust. There are no promissory notes. Hawala is an ancient system originating in south asia.

Today it is used around the world to conduct legitimate remittances. Hawala is an informal money transfer system in which money is passed on through a network of brokers who are known as hawaladars without the actual physical movement of cash. It is the transmission of money in ways other than the regular banking routes and hence sometimes called underground banking. Hawala or hewala arabic.

Like any other remittance system hawala can and does play a role in money laundering. So what is hawala banking exactly.