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Hawala

Hawala is an informal value transfer system that facilitates the movement of funds across borders without the physical exchange of money, relying instead on a network of brokers known as hawaladars who record transactions in coded ledgers and settle balances through trust-based offsets, reverse remittances, or commercial trade.^[1] Originating in ancient trading practices among Muslim merchants in the Middle East and South Asia, where the term hawala derives from an Arabic word meaning "transfer" or "bill of exchange," the system has persisted due to its efficiency in regions with underdeveloped formal banking infrastructure.^[2] Hawala enables rapid, low-cost remittances for migrant workers and supports cross-border commerce, often processing transfers faster and at fractions of the fees charged by regulated financial institutions.^[1] However, its opaque operations and absence of formal oversight have rendered it vulnerable to exploitation for illicit activities, including money laundering and the financing of terrorism, prompting international regulatory scrutiny from bodies like the Financial Action Task Force (FATF).^[3] Despite such concerns, empirical evidence indicates that the majority of hawala transactions serve legitimate economic needs, particularly in underserved populations, underscoring a tension between its utility and the challenges of enforcement without stifling access to affordable finance.^[2]^[4]

History and Origins

Ancient Roots and Early Development

The practice of informal value transfer, akin to modern hawala, traces its roots to pre-Islamic trade networks in the Near East and South Asia, where merchants relied on trust-based promissory notes and bills of exchange to mitigate risks associated with carrying bullion across caravan routes. These mechanisms, evident in early medieval commerce, allowed traders to settle debts through verbal agreements or written IOUs enforceable via personal networks, bypassing the vulnerabilities of physical currency transport in arid and unstable regions. Historical accounts indicate such systems were widespread in the Middle East centuries prior to formalized Islamic finance, supporting long-distance exchanges without state oversight.^[5]^[6] With the rise of Islam in the 7th century CE, these preexisting practices were systematized under the term hawala—from the Arabic root h-w-l, denoting transfer or delegation—aligning them with Sharia principles that prohibited riba (usury) while permitting debt assignments based on mutual trust. By the 8th century, during the Umayyad and early Abbasid eras, hawala facilitated riba-free remittances for pilgrims, soldiers, and merchants, as referenced in classical Islamic legal texts on jurisprudence. This adaptation proved crucial for the caliphate's economic expansion, enabling efficient fund flows across vast territories without interest-bearing loans.^[7]^[8] In parallel, South Asian variants like hundi—Sanskrit-derived instruments for credit and remittance—emerged within Indian merchant guilds, with records confirming their use by the 12th century for inland and coastal trade. These systems linked to broader Eurasian exchanges, including the Silk Road overland caravans and Indian Ocean maritime routes, where hundis served as negotiable orders drawn on distant agents, settling imbalances through periodic clearings rather than coin shipments. Such practices underscored the role of kinship and reputational enforcement in pre-modern finance, predating European bills of exchange by centuries.^[9]^[10]

Islamic and Medieval Expansion

The concept of hawala, rooted in classical Islamic jurisprudence as a mechanism for debt transfer (ḥawāla), emerged as a formalized practice in the early medieval Islamic world, enabling the delegation of financial obligations without physical movement of funds. This system, referenced in legal texts from the 8th century onward, allowed a creditor to assign a debt to a third party through verbal or simple written agreements, bypassing the need for state-backed enforcement in an era predating centralized banking. Its institutionalization aligned with Sharia principles prohibiting riba (usury) while facilitating efficient exchange in expansive trade networks.^[6]^[11] From the 9th to 13th centuries, during the Abbasid Caliphate's peak, hawala expanded through Muslim merchant networks across the Middle East, connecting Baghdad, Damascus, and Cairo to distant outposts in Persia and beyond. Traders leveraged interconnected family and communal ties to execute transfers, minimizing risks from banditry and currency fluctuations in regions lacking reliable coinage standardization or secure transport. This trust-based scaling of economic exchange proved causally advantageous in low-trust environments, where formal contracts faced enforcement hurdles due to fragmented political authority post-caliphal decline. Historical accounts of caravan commerce highlight how such networks sustained silk and spice routes, with hawaladars settling balances via commodity offsets or reverse flows rather than immediate cash.^[12]^[13] Hawala's utility extended to religious and military endeavors, notably funding the annual Hajj pilgrimage to Mecca, where participants from as far as North Africa could draw on pre-arranged credits upon arrival, avoiding the perils of hauling gold or silver over thousands of miles. This reduced effective transaction costs—estimated in some analyses as 1-2% per transfer versus higher formal fees—by substituting relational enforcement for institutional safeguards, a pragmatic adaptation to unstable frontiers without central monetary authorities. In wartime contexts, such as Crusader incursions or internal Abbasid conflicts around 1055-1258, hawala channels supported logistical financing for armies and rulers, channeling resources discreetly across caliphal territories.^[14]^[15] Distinct from contemporaneous formal instruments like the suftaja—a promissory note akin to a bill of exchange redeemable at distant branches via court recognition—hawala emphasized informal, network-driven reciprocity over documented obligations. While suftaja required merchant house backing and legal recourse, often fading by the late medieval period amid institutional shifts, hawala's reliance on honor codes and kinship bonds yielded greater flexibility and lower overhead in peripheral or contested areas, underscoring its efficiency for small-scale or urgent dealings. This differentiation highlights hawala's role as a parallel system thriving where state capacity waned, fostering commerce amid medieval Islam's decentralized polities.^[13]^[16]

Colonial and Post-Colonial Evolution

During British colonial rule in India from the mid-19th century, the hundi system—a negotiable instrument for value transfer closely related to hawala—enabled merchants to conduct long-distance trade and remittances efficiently, often outperforming colonial banks in speed and cost. British administrators viewed hundis as integral to the economy, taxing them as a revenue stream between 1858 and 1947 while noting their role in knitting domestic markets together through networks of couriers and brokers. Indian diaspora traders in British East African colonies, including Kenya and Uganda from the late 19th century, adapted these mechanisms for regional commerce, relying on kinship-based trust to circumvent the bureaucratic delays and higher fees of formal European banking institutions, as evidenced by trade records and merchant practices.^[10]^[17]^[18] In the post-colonial period following India's independence in 1947, hawala persisted and expanded due to persistent gaps in formal financial infrastructure, such as limited rural banking access and inefficient state systems in South Asian nations. A marked surge emerged in the 1970s amid the Gulf oil boom, which drew millions of South Asian laborers to oil-rich states like Saudi Arabia and the United Arab Emirates; remittances flowed back via hawala networks, prized for their reliability, minimal fees (often under 1-2% versus 5-10% in banks), and ability to operate without documentation in regions with weak regulatory oversight. This adaptation addressed causal deficiencies in official channels, including slow processing times and currency controls, sustaining hawala's dominance for migrant transfers estimated at billions annually by the late 20th century.^[19]^[20] By the 1990s, diaspora-driven globalization further entrenched hawala, with networks spanning continents and handling substantial remittance volumes amid rising international migration. IMF assessments highlighted its prevalence, noting that in Somalia, hawala-facilitated remittances equated to up to 40% of GDP in the late 1990s, while in Pakistan, informal systems like hawala accounted for a significant share—estimated at 20-50%—of total inflows before widespread digital banking alternatives. This endurance reflected underlying realities: formal institutions' failure to match hawala's low overhead, geographic reach via personal connections, and resilience against economic instability, prioritizing efficiency over regulatory compliance in developing contexts.^[21]^[22]

Operational Mechanism

Core Procedure and Trust-Based Transfers

In the core procedure of hawala, a sender approaches a hawaladar—typically an informal broker operating within a network of trusted counterparts—and delivers cash equal to the desired transfer amount plus a small fee, along with instructions identifying the recipient and a prearranged code or password for verification.^[23] The hawaladar then communicates the details of the transaction to a corresponding hawaladar at the recipient's location, often via telephone, encrypted messaging, or established network channels, authorizing the release of an equivalent sum upon presentation of the code.^[2] The recipient collects the funds directly from this second hawaladar by providing the code, completing the value transfer without any physical movement of currency or formal documentation, as the system is intentionally designed to minimize paper trails and regulatory oversight.^[23] This process depends entirely on bilateral or multilateral trust among hawaladars, who maintain ongoing relationships to ensure reliability without enforceable contracts or collateral, relying instead on reputational incentives and reciprocal obligations to mitigate default risks.^[24] Settlements between hawaladars occur separately from the initial transfer, often through netting offsets where subsequent transactions in the opposite direction reduce accumulated imbalances, or via alternative methods such as cash couriers, reverse hawala flows, commodity trades, or occasional formal bank wires for larger discrepancies.^[2]^[23] Empirical observations indicate that a typical hawala remittance of around $1,000 can be executed and settled within hours, contrasting with formal banking channels that may require 1-5 days due to compliance checks and intermediaries, while fees generally range from 1% to 2% of the principal—substantially below equivalent bank or money transfer operator charges of 5-7%.^[25]^[26] This efficiency stems from the absence of regulatory hurdles and the leverage of pre-existing trust networks, though it introduces vulnerabilities to errors or disputes resolvable only through informal arbitration.^[24]

Settlement Methods and Network Dynamics

In hawala networks, settlement of imbalances arises from asymmetric transfers, where hawaladars record debits and credits in private ledgers without immediate fund movements. These positions are resolved through multilateral netting, wherein multiple operators within interconnected groups offset mutual obligations periodically, functioning as informal clearing mechanisms. For instance, if Hawaladar A owes B while B owes C, and C owes A, the debts cancel out across the chain, minimizing actual transfers.^[3]^[27] Remaining net imbalances are cleared via physical cash shipments by couriers, reverse hawala transactions that redirect future flows, or commodity trades such as over- or under-invoicing in goods like textiles or gold to balance books without direct currency movement.^[2]^[28] Central hubs, often termed "super-hawaladars," play a pivotal role in aggregating and resolving larger imbalances, particularly in nodes like Dubai, which serves as a global nexus due to its trade volumes and lax oversight in the 2000s. These operators, with extensive international ties, facilitate netting across regions by pooling obligations from peripheral hawaladars and settling via formal banking or trade channels inaccessible to smaller players. FATF typologies from the mid-2000s documented such dynamics in investigations of remittance flows, revealing Dubai-based networks handling billions in annual transfers, often masked through import-export discrepancies to evade detection.^[3]^[29] This hub-and-spoke structure enhances efficiency but introduces vulnerabilities, as disruptions at hubs—like regulatory crackdowns—can cascade failures across spokes. Network viability hinges on reputation-based incentives, where hawaladars' repeated interactions foster self-enforcing equilibria akin to game-theoretic models of infinite-horizon games with discounting. Honest settlement preserves access to the network's liquidity and client base, while defaults trigger exclusion via ostracism, as word-of-default spreads rapidly in tight-knit ethnic or kinship groups, imposing severe opportunity costs. Empirical analyses of hawala remittances confirm this, showing low default rates sustained by relational contracting rather than legal enforcement, with reputation capital outweighing short-term gains from defection.^[30]^[31] Such dynamics explain the system's resilience despite informality, though they falter under external shocks like geopolitical tensions that erode trust.

Fees, Risks, and Participant Incentives

Hawala operators charge fees ranging from 2% to 5% of the principal amount transferred, substantially below the 7-10% levied by formal providers like Western Union or MoneyGram, owing to minimal operational overhead such as the lack of branches, regulatory reporting, and electronic verification processes.^[30] ^[2] This efficiency arises from reliance on pre-existing social and trade networks for settlement, often involving reverse remittances, commodity shipments, or currency arbitrage rather than direct fund movements.^[31] Despite these cost savings, participants encounter elevated risks absent in regulated systems, including fraud, broker absconding with funds, or network disruptions from trust erosion, with no recourse to insurance or courts for recovery.^[32] ^[5] Such vulnerabilities stem from the system's informality, where settlements depend on bilateral balances that can imbalance during volatile trade flows or geopolitical events, potentially causing localized defaults; empirical quantification remains challenging due to undocumented operations, though isolated broker insolvencies have precipitated fund losses in high-volume corridors.^[23] Senders prioritize hawala for its immediacy—often delivering value within hours—and accessibility to underserved populations without identification requirements, outweighing formal alternatives' delays and documentation burdens.^[33] Brokers, in turn, are motivated by fee income alongside profit from exploiting exchange rate spreads or trade imbalances in netting obligations, sustaining participation through reputation mechanisms that penalize unreliability via ostracism from networks.^[23] ^[34] Low entry barriers, requiring only personal connections and modest capital, enable broad broker involvement but engender opacity that masks credit exposures and amplifies fragility, as informal finance studies highlight how unchecked imbalances can trigger contagion-like failures without centralized oversight.^[35] ^[31]

Regional Variations

South Asia and Hundi Systems

In South Asia, particularly India, Pakistan, and Bangladesh, the hawala system manifests as the hundi, a traditional financial instrument functioning as a negotiable bill of exchange or promissory note for remittances and trade credit.^[36] ^[9] Hundis originated in medieval India, with evidence of their use dating to at least the 12th century, enabling merchants to transfer funds across regions without physical cash movement through trusted networks.^[9] This system supported extensive trade by diaspora communities, such as those from Sindh and Hyderabad, who leveraged hundis for global commerce spanning centuries.^[37] Hundis typically take the form of paper-based IOUs issued by a financier (shah or sahu), redeemable by the bearer at a distant correspondent via pre-established trust ties within family or caste-based merchant guilds.^[38] ^[39] Unlike more oral Middle Eastern hawala variants, South Asian hundis often integrate with formal trade practices, such as embedding credit extensions into invoices for commodities like textiles or spices, facilitating both remittance and commercial settlement.^[10] These networks rely on relational trust rather than legal enforcement, with settlement occurring through reverse cash flows or commodity shipments to balance books periodically.^[39] In contemporary practice, hundi/hawala dominates informal remittances from South Asian migrant workers in Gulf states, bypassing formal banking delays and costs, especially in rural recipient areas where bank access is limited.^[19] Pakistan's State Bank reports total remittances exceeding $27 billion annually, with informal channels like hundi estimated to handle a substantial unrecorded share, potentially amplifying official figures by 50% or more due to evasion of fees and controls.^[40] ^[33] Transfers occur swiftly—often within hours—compared to days for bank wires, supporting household consumption and local economies amid weak formal infrastructure.^[19] However, hundi systems have facilitated political corruption scandals, notably in India's 1990s Jain Hawala case, where diaries revealed $18 million in undocumented bribes to senior politicians via hawala networks, exposing vulnerabilities to illicit political financing despite their legitimate trade roots.^[41] In Pakistan, similar unregulated flows have prompted central bank crackdowns, highlighting risks of capital flight and governance challenges in informal channels intertwined with diaspora economics.^[42]

Middle East and North Africa

Hawala networks thrive in oil-rich Gulf states such as the United Arab Emirates (UAE) and Saudi Arabia, where they primarily serve expatriate workers—many from South Asia—in transferring remittances home efficiently and at low cost, bypassing formal banking limitations like high fees and bureaucratic delays.^[23] In the UAE, hawaladars leverage familial and tribal trust ties among migrant communities to handle substantial volumes, with Dubai emerging as a pivotal clearinghouse for netting obligations across global routes, including links to Europe.^[23] Although prohibited under Saudi Arabia's Banking Control Law, which bans unlicensed money transmission, hawala persists underground due to its speed and accessibility for the kingdom's large expatriate labor force.^[43] The post-1970s oil price surge fueled hawala's growth in the region by attracting millions of migrant workers to Gulf construction and service sectors, generating remittance demands that formal systems could not meet amid sender countries' currency controls and recipients' limited banking penetration.^[2] This era transformed Dubai into a hawala nexus, where exchange houses—often operated by South Asian diaspora—consolidate small transfers into large settlements, integrating with import-export trade via techniques like invoice manipulation to offset balances without physical fund movements.^[23] Such adaptations suit resource-driven economies, where commodity trade provides natural cover for value equalization, enhancing resilience in volatile oil markets. In instability-plagued areas like Yemen, hawala adapts to support remittance inflows and humanitarian aid distribution amid fractured formal finance, with pre-conflict bank account ownership below 4% and ongoing liquidity crises in licensed institutions.^[44] Networks from Gulf donors, particularly Saudi Arabia, channel funds via trusted kinship brokers, enabling importers to acquire foreign currency for essentials; total remittances reached up to $8 billion in 2019, with informal hawala routes comprising a major share due to derisking by international banks.^[44] Organizations like UNICEF have utilized regulated hawala variants for cash assistance to millions of households since 2017, underscoring its role in sustaining economies under sanctions and conflict.^[44] Comparable dynamics in Jordan involve hawala for expatriate and regional aid transfers, though formal oversight has curbed some informal dominance.^[23]

Horn of Africa and Somali Xawala

In Somalia, the xawala system— the local variant of hawala— became the primary mechanism for financial transfers after the central government's collapse in 1991 during the civil war, filling the void left by the absence of formal banking institutions.^[45] Operating through a network of informal agents, xawala handles the majority of incoming remittances, which total approximately $1.3 billion to $2 billion annually and constitute 23-25% of GDP, with funds originating largely from Somali diaspora in the United States, United Kingdom, and Gulf countries.^[46]^[47] These transfers sustain basic needs for about 40% of households, enabling household consumption, small-scale trade, and community reconstruction projects in the absence of state services.^[48] The system's resilience stems from clan-based trust and relational networks, where agents settle obligations through reciprocal balances rather than physical cash transport, often coordinated via satellite phones and mobile communications across fragmented territories.^[49] Unlike South Asian hundi systems embedded within partially regulated economies, Somali xawala operates at a stateless national scale, supporting an informal survival economy that has persisted amid ongoing conflict and weak governance.^[50] Since around 2010, xawala networks have increasingly hybridized with mobile money platforms, such as Hormuud's EVC Plus, allowing agents to settle a portion of transfers digitally while retaining the core informal, trust-dependent structure; up to 45% of agents reportedly integrate these tools for efficiency in urban and diaspora-linked operations.^[51] This adaptation enhances speed and reach in remote areas but exposes the system to risks like localized extortion by militias, given the lack of enforceable legal recourse.^[2] Diaspora remittances channeled through xawala have empirically funded private initiatives, including infrastructure rebuilding and clan-mediated security arrangements, demonstrating its role in bottom-up economic stabilization.^[52]

West Africa and Local Adaptations

In West Africa, hawala networks have proliferated along Sahel trade corridors, facilitating remittances from labor migrants in Europe and North Africa to countries such as Nigeria and Senegal, where formal banking penetration remains low. These systems emerged prominently in the post-colonial era, fueled by waves of economic migration from rural areas to urban centers and abroad, enabling rapid, trust-based transfers without reliance on regulated institutions.^[53] In Nigeria, hawala operators handle substantial inward flows from diaspora communities in the United Kingdom and Italy, often settling via physical cash couriers or offsetting trade debts in commodities like agricultural goods.^[54] Similarly, in Senegal, networks link migrants in France to families in Dakar and rural Casamance, with operators leveraging kinship ties for security amid volatile regional politics.^[55] Local adaptations in West Africa involve hybridization with indigenous informal finance, notably in Ghana, where hawala integrates with susu rotating savings associations to settle trades in gold and artisanal mining outputs. This blending allows hawaladars to pool funds from migrant remittances into susu cycles, providing liquidity for small-scale miners and traders while minimizing exposure to bank fees and documentation.^[24] Such mechanisms support cross-border commerce in the Economic Community of West African States (ECOWAS), where operators arbitrage exchange rate disparities between the naira, CFA franc, and cedis, netting settlements through bilateral trade imbalances rather than immediate cash movements. Post-2020 sanctions on Sahel states like Mali further accelerated this growth, as hawala brokers in Bamako and Niamey bypassed frozen formal channels to sustain migrant inflows.^[56] Empirically, hawala's lower transaction fees—often under 2% compared to 6-10% for formal remittances—enhance financial inclusion and poverty alleviation by channeling funds directly to unbanked households, supporting consumption and small investments in agriculture.^[2] However, this efficiency enables smuggling of goods and humans along migrant routes from Ghana to Senegal and onward to Libya, with networks laundering proceeds from gold panning and fuel trafficking.^[57] Unlike the Horn of Africa's xawala, which operates amid relative dollar stability, West African variants grapple with multi-currency volatility across ECOWAS, prompting adaptations like deferred settlements tied to commodity prices to hedge risks.^[58] These features underscore hawala's resilience in fragmented economies but heighten vulnerabilities to illicit diversion.

Global Diaspora Networks

Hawala networks have proliferated in Western countries via migration patterns, embedding within South Asian and African diaspora communities in the United Kingdom, United States, and Canada, where they primarily handle remittances through trust-based ethnic ties. These systems appeal to migrants, including settled workers and irregular entrants, due to low fees approximating the UN Sustainable Development Goal target of 3% and broad accessibility beyond formal banking requirements. Operators often maintain visible community presences, such as in shops or via familial links, serving unbanked or underbanked populations.^[2]^[3] In the UK, hawala prominently supports the Pakistani diaspora, with informal remittance mechanisms—including hawala—estimated to channel approximately £0.5 billion annually in the early 2000s, encompassing substantial flows along the UK-Pakistan corridor tied to trade and kinship networks. In the US, South Asian communities utilize hawala for cross-border transfers, often integrated into ethnic enclaves for efficiency in regions with limited banking penetration. Canadian networks, particularly among African groups like Somalis, rely on hawala agents such as Dahabshiil for quick, low-cost services, reflecting adaptations to local diaspora needs.^[59]^[60]^[61] Distinct from regional variants, Western diaspora hawala frequently hybridizes with licensed currency exchange bureaus or formal money service businesses, resembling regulated entities while enabling reverse flows—funds repatriated for investments, such as deploying safekept client deposits into stock markets. Limited integration with cryptocurrencies occurs, with only 4% of surveyed operators employing them for settlements, primarily in select North American and European nodes.^[3]^[2]^[35] Regulatory pressures in these jurisdictions prompt adaptations like mandatory licensing or registration—prevalent in 50% of surveyed countries—and computerized record-keeping for 70% of operators, contrasting with looser oversight in origin regions and enhancing transparency without fully supplanting informal trust dynamics.^[3]^[2]

Legitimate Economic Role

Remittances and Financial Inclusion

Hawala systems play a pivotal role in facilitating remittances to populations underserved by formal banking, particularly in regions with sparse financial infrastructure. In Somalia, where formal banking penetration remains limited and remittances constitute approximately 16% of GDP as of 2023, over 55% of incoming transfers occur via Hawala networks, providing a reliable alternative for diaspora funds essential to household survival and economic stability.^[62]^[63] These networks enable rapid, trust-based transfers without the need for physical money movement or formal accounts, filling voids left by underdeveloped banking sectors that exclude large segments of the rural and nomadic populations.^[23] Empirical data highlights Hawala's cost advantages, with transfer fees often substantially lower than formal channels—typically under 5% compared to global averages exceeding 6% for bank or money transfer operator services—making it a more accessible option for low-income senders and recipients.^[2]^[64] In recipient countries reliant on such informal flows, remittances channeled through Hawala contribute directly to GDP, representing 15-25% in cases like Somalia, where they sustain consumption, investment, and poverty alleviation.^[46]^[62] This efficiency supports causal pathways to welfare improvements, including expedited delivery to remote areas that formal systems struggle to reach. Studies from Pakistan demonstrate tangible benefits, showing that remittance-receiving households allocate additional funds to education and health expenditures, leading to higher school enrollment rates, reduced child malnutrition, and lower mortality—outcomes linked to informal transfer mechanisms like Hawala that bypass bureaucratic delays.^[65] Proponents emphasize these dynamics as evidence of enhanced financial inclusion for the unbanked, arguing that Hawala democratizes access to international funds in trust-deficient environments.^[5] Critics, however, point to network-based limitations, where participation depends on ethnic, familial, or communal ties, potentially exacerbating inequalities by sidelining those outside established hawaladars' circles.^[2]

Support for Trade and Commerce

Hawala networks enable efficient settlement of informal cross-border trade transactions, particularly in regions with volatile currencies and limited formal banking access. Traders employ hawala for invoice discounting, where importers receive immediate local-currency liquidity upon delivery, thereby reducing exposure to exchange rate risks and avoiding delays associated with formal mechanisms like letters of credit, which often require 30-60 days for processing. In the Pakistan-Afghanistan corridor, this system supports small-scale imports and exports by facilitating post-shipment payments through trusted hawaladars, bypassing capital controls and bureaucratic hurdles that hinder official channels. Settlements typically occur within 6-12 hours between major hubs, with fees of 2-5%, offering cost and speed advantages over banks charging higher spreads and processing times. Empirical evidence from analogous South Asian informal trade highlights hawala's scale: studies estimate it channels up to 15% of small-scale cross-border flows, such as between India and Bangladesh, through under-invoicing and direct hawaladar linkages that ensure liquidity without physical cash transport.^[5] In the Pakistan-Afghanistan context, parallel hawala markets dominate due to Afghanistan's underdeveloped banking post-2001, enabling traders to settle balances via reciprocal trade offsets or commodity exchanges, which sustains volumes despite official trade data discrepancies averaging billions annually. In the Horn of Africa, hawala underpins livestock exports, a sector generating over $200 million annually across Ethiopia, Somaliland, and Puntland to Gulf markets. Exporters use hawala for business settlements with importers, providing reliable payment mechanisms in clan-based networks that formal systems cannot match amid instability. Following Somaliland's 1991 state collapse, hawala evolved from cash-for-commodities exchanges to formalized trust-based transfers for livestock to Yemen, offering exporters prompt funds conversion and importers deferred payment options without banking intermediation.^[66] This distinguishes trade-oriented hawala from remittances by emphasizing cyclical settlements tied to export cycles, fostering commerce in pastoral economies.^[67]

Advantages Over Formal Banking Systems

Hawala transactions bypass the regulatory compliance burdens of formal banking, such as extensive documentation and anti-money laundering checks, enabling near-instantaneous settlements via phone or trusted intermediaries rather than multi-day processing cycles typical of international wire transfers.^[31] This speed arises from reliance on pre-existing personal and commercial networks, where funds are offset through reciprocal obligations without physical movement, often completing within hours compared to 1-5 business days for bank-mediated cross-border payments subject to verification delays.^[68] The system's operational flexibility extends to 24/7 availability and functionality in areas lacking banking infrastructure, such as rural or conflict zones, where formal institutions cannot reliably operate due to branch limitations or power outages.^[24] Empirical assessments of migrant and trader usage highlight this edge, with surveys indicating preference for hawala's convenience in remote settings over formal alternatives constrained by operating hours and geographic coverage.^[2] Cost efficiencies stem from lean network structures that eliminate overheads like branch maintenance and digital platforms, yielding commissions often 25-50% lower than bank or money transfer operator fees for equivalent remittances—typically 1-2% versus global averages exceeding 6%.^[3]^[64] These savings, driven by informal deregulation and scale from diaspora ties, enhance affordability in inflationary environments, though the absence of insured recourse underscores a trade-off inherent to its streamlined design.^[5]

Illicit Uses and Security Risks

Money Laundering and Criminal Financing

Hawala networks enable money laundering by layering illicit funds through multiple intermediary transfers across jurisdictions, obscuring origins without formal records or regulatory oversight.^[2] This anonymity allows criminal actors to integrate proceeds into legitimate economies, such as real estate investments, while evading bank scrutiny.^[2] In drug trafficking, hawaladars facilitate payments for narcotics, precursors, and bribes, with transactions often involving chains of operators in hubs like Dubai or Istanbul.^[2] Empirical cases demonstrate hawala's role in laundering drug cartel proceeds. In a 2012 U.S. investigation, operators linked to Mexico's Sinaloa cartel transferred over $15 million in cocaine and synthetic drug profits from California to foreign accounts via layered hawala routes.^[2] Similarly, a 2018 U.S. conviction involved a hawala scheme moving funds for international drug trafficking organizations, including Latin American cartels, by aggregating cash deposits and settling debts informally.^[69] West African hawala branches, such as those in Nigeria connected to Europe, have handled suspicious opiate-related transfers, enabling flows from Latin American cocaine routes transiting the region to Middle Eastern or European markets.^[2] A 2020 UNODC study of Afghan opiate traffickers found 15 out of 41 exclusively used hawala for such payments, citing its reliability and low detection risk.^[2] Trade-based money laundering typologies frequently incorporate hawala for debt settlement. Criminals over- or under-invoice imports/exports to misrepresent value, then use hawala to balance accounts without traceable wires; for instance, a UAE-Pakistan case involved under-invoicing machinery exports by GBP 500,000, with the excess settled via hawala cash pools.^[23] FATF analyses describe networks combining informal value transfer services like hawala with fictitious trades or multiple invoicing to launder drug proceeds, as in a black market peso exchange where U.S. firms exported goods to launder cartel cash, processing over $8 million before a 2011 conviction.^[70]^[23] Quantifying hawala's illicit share remains challenging due to its opaque nature, with no precise global estimates available; however, case data reveal multimillion-dollar volumes, and surveys of 113 hawaladars across 18 countries indicate 44 viewed the system as more vulnerable to criminal misuse than formal banking.^[2] Unregulated hawala may comprise 10-50% of remittance markets in affected regions, some portion of which supports laundering via hybrid legitimate-illicit operations.^[23] The causal driver is hawala's trust-based settlement, which bypasses due diligence required in regulated systems.^[2]

Terrorist Funding and Post-9/11 Scrutiny

The September 11, 2001, terrorist attacks prompted intensified global scrutiny of hawala systems after U.S. investigations determined that al-Qaeda transferred approximately $300,000–$500,000 to the hijackers primarily through hawala networks originating from the United Arab Emirates, Saudi Arabia, and Germany.^[71] These funds, often settled via cash couriers or offsetting debts among hawaladars, evaded formal banking oversight, enabling rapid, undocumented movement that intelligence agencies later traced through witness testimonies and financial pattern analysis.^[72] The U.S. Treasury Department highlighted hawala's role in al-Qaeda's broader financing, noting its reliance on trust-based networks spanning South Asia and the Middle East, which provided operational secrecy absent in regulated channels.^[73] Post-9/11 regulatory efforts, including Financial Action Task Force (FATF) recommendations, classified hawala as a high-risk informal value transfer system (IVTS) for terrorist financing due to its opacity and settlement mechanisms that leave no auditable trail.^[3] Empirical cases underscore this vulnerability: in Somalia and Yemen, al-Shabaab has exploited hawala corridors for extortion proceeds and diaspora donations, with U.S. Treasury designations in March 2024 targeting a network of 16 entities and individuals facilitating millions in transfers via hawala-linked businesses in East Africa and the Gulf.^[74] These flows, distinct from profit-oriented money laundering, are driven by ideological mobilization, allowing small-scale remittances to aggregate into attack funding without electronic records.^[75] In Afghanistan and Pakistan, hawala persists as a conduit for Taliban and ISIS-Khorasan (ISIS-K) operations, channeling cross-border funds from narcotics, extortion, and external sympathizers estimated in tens of millions annually.^[76] U.S. intelligence reports from 2021–2024 document hawala's use in Taliban revenue collection and ISIS-K's evasion of interdiction, exploiting porous frontiers and unregulated operators to sustain insurgent logistics amid Taliban governance gaps.^[77] FATF assessments affirm the systemic risk, as hawala's decentralized structure inherently facilitates undetected ideological financing, with vulnerabilities amplified in conflict zones where formal alternatives are scarce or distrusted.^[4] While some analyses suggest terrorist exploitation represents a minority of hawala volume, declassified intelligence and designations reveal recurrent patterns that underscore its causal enablement of low-visibility transfers essential to asymmetric threats.^[3]

Sanctions Evasion and Geopolitical Implications

Hawala networks have been instrumental in enabling Iranian actors to circumvent U.S. sanctions, particularly by facilitating payments for prohibited oil exports and other trade. In the 2010s, Iranian entities utilized hawala systems based in the UAE to settle illicit oil sales, bypassing formal banking channels monitored by the Office of Foreign Assets Control (OFAC).^[7] These informal transfers allowed Iran to maintain revenue streams despite reimposed sanctions following the U.S. withdrawal from the Joint Comprehensive Plan of Action in 2018, with hawala operators handling settlements that evaded traceable electronic records.^[78] OFAC has repeatedly designated hawala-linked entities as part of Iran's shadow banking apparatus, which supports sanctions evasion. For example, in March 2023, OFAC sanctioned 39 entities forming a multi-jurisdictional shadow network used by Iran to process payments outside regulated systems, incorporating hawala-like informal value transfer methods.^[79] In June 2024, further actions targeted nearly 50 entities in similar networks, highlighting hawala's role in obfuscating fund flows for sanctioned activities.^[80] More recently, in November 2024, OFAC levied a $1.1 million civil penalty on an individual for 75 violations of Iranian sanctions regulations involving hawala transfers from the U.S. and Canada.^[81] Similar patterns extend to North Korean evasion tactics, where hawala and analogous informal systems aid in bypassing UN and U.S. sanctions on weapons proliferation. North Korean actors have leveraged hawala networks in regions like Southeast Asia to move funds derived from illicit coal and cyber activities, despite limited direct designations tying hawala explicitly to Pyongyang's core operations.^[2] These methods exploit gaps in formal oversight, allowing sanctioned regimes to procure dual-use goods and sustain nuclear programs. Geopolitically, hawala's opacity undermines the effectiveness of Western sanctions regimes by providing resilient, unmonitored conduits that preserve adversaries' financial lifelines. This enables Iran and North Korea to fund military advancements and proxy operations, diluting the intended isolation and prolonging threats to international security.^[3] U.S. Treasury actions in the 2020s underscore how such networks counteract diplomatic pressure, as evaders adapt faster than enforcers can disrupt them, effectively granting rogue states a strategic advantage in resource acquisition.^[80]

Regulatory and Enforcement Landscape

International Standards and FATF Guidelines

The Financial Action Task Force (FATF), established in 1989, sets international standards for combating money laundering and terrorist financing through its 40 Recommendations, which classify hawala as part of money or value transfer services (MVTS), encompassing informal systems like informal value transfer systems (IVTS).^[82] Recommendation 13 mandates that countries ensure MVTS providers, including hawala operators, are licensed or registered as financial institutions, subjected to customer due diligence (CDD), record-keeping, and suspicious transaction reporting, with unlicensed operations prohibited. These standards, updated in 2012 and revised periodically, emphasize a risk-based approach (RBA) to supervision, requiring jurisdictions to assess and mitigate ML/TF risks posed by hawala's trust-based, non-documentary operations, such as settlement via trade-based netting or cash pooling. FATF guidance specifically addresses hawala and other similar service providers (HOSSPs), highlighting their role in value transfer without physical funds movement, often settled through informal networks, and urges enhanced due diligence for high-risk corridors like those involving conflict zones or high-remittance flows from the Middle East, South Asia, and the Horn of Africa.^[4] Over 200 jurisdictions worldwide, through FATF's global network of 40 members and nine regional bodies, have committed to implementing these Recommendations, with mutual evaluation reports assessing compliance on MVTS regulation since the early 2000s.^[83] The standards establish minimum baselines, distinct from national variations, by requiring international cooperation for cross-border oversight and prohibiting jurisdictions from using secrecy as a barrier to information exchange.^[23] Complementing FATF, the United Nations Office on Drugs and Crime (UNODC) and International Monetary Fund (IMF) contribute typologies for hawala monitoring, analyzing patterns of misuse such as layered transactions evading formal trails, with UNODC reports detailing operational risks in opiate trade and migrant smuggling corridors.^[2] IMF studies, including post-2001 analyses, underscore the need for IVTS integration into formal systems via licensing to enable traceability, while noting persistent challenges in verifying compliance due to hawala's opacity.^[31] FATF's RBA guidance, issued in 2020 for MVTS, prioritizes resource allocation to high-risk HOSSP activities, such as those lacking verifiable client identities, over low-risk legitimate remittances. Empirical assessments reveal implementation gaps, with many jurisdictions showing partial effectiveness in evaluations, evidenced by low rates of hawala-related suspicious activity reports leading to investigations.^[84]

National Licensing and Compliance Efforts

In Pakistan, following heightened global scrutiny after the September 11, 2001 attacks, the State Bank of Pakistan (SBP) issued directives in June 2004 requiring hawala operators, known locally as hawaladars, to register as authorized foreign exchange dealers, maintain minimum capital requirements of PKR 2 million (approximately USD 35,000 at the time), and comply with anti-money laundering provisions under the Anti-Money Laundering Act of 2010.^[85] These measures aimed to integrate informal operators into the formal financial system while enabling oversight of transaction records and customer identification. However, enforcement has been uneven, with unlicensed hawaladars continuing to dominate in regions like Peshawar and Karachi, where informal networks facilitate over 50% of remittances despite regulatory mandates.^[86] The United Arab Emirates (UAE) implemented a pioneering registration framework in 2002 through the Central Bank, mandating hawala providers to obtain licenses, report suspicious transactions, and adhere to know-your-customer protocols under Federal Law No. 20 of 2018 on anti-money laundering.^[87] By 2019, the Registered Hawala Providers Regulation (No. 24/2019) formalized operations, requiring providers to maintain audited accounts and segregate client funds, resulting in over 200 licensed entities by 2023 that handle legitimate cross-border transfers while reducing exposure to illicit flows.^[88] In Afghanistan, Da Afghanistan Bank established a supervisory regime in September 2004 for money service providers, including hawaladars, under the Money Services Providers Law, which demands licensing, record-keeping for transactions exceeding AFN 500,000 (about USD 6,000), and reporting to combat terrorist financing amid the country's reliance on hawala for 80-90% of financial activity in the mid-2000s.^[89]^[3] While these national frameworks have prompted some hawaladars to register for enhanced legitimacy and access to banking settlements—evidenced by increased formal participation in UAE and Pakistan—compliance remains partial, with reports indicating persistent underground operations comprising the majority in high-risk corridors due to evasion tactics and high setup costs.^[86] Licensing efforts mitigate security risks by enabling transaction monitoring and fund tracing, yet they elevate operational expenses, such as capital reserves and compliance audits, which studies link to 10-20% higher fees for low-value remittances, disproportionately affecting unbanked migrant workers reliant on hawala's efficiency.^[90] In jurisdictions like these, partial formalization has curbed some illicit uses without fully displacing informal networks, highlighting the trade-off between regulatory stringency and accessibility.^[3]

Persistent Challenges and Enforcement Gaps

The inherent informality of hawala systems, characterized by trust-based networks and minimal documentation, poses significant barriers to detection and monitoring. According to a 2013 FATF assessment of 33 jurisdictions, most countries lack the capacity to estimate the scale of unregulated hawala operators, with only a minority providing rough figures ranging from 25 to several hundred per country, underscoring pervasive enforcement gaps.^[3] Suspicious transaction reports (STRs) related to hawala remain low, typically 8 to 220 annually in reporting jurisdictions, reflecting limited investigative success despite high perceived risks—86% of surveyed countries rated hawala as a high money laundering vulnerability and 81% for terrorist financing.^[3] Jurisdictional fragmentation exacerbates these issues, as hawala networks span multiple borders with settlements often occurring via informal trade or cash outside formal banking channels, rendering them invisible to national regulators.^[3] Only 8 of 21 assessed jurisdictions require operators to deal exclusively with regulated foreign counterparts, leaving gaps exploited by cross-jurisdictional flows. Cultural embedding further resists formal oversight; hawala's reliance on kinship ties and closed community structures deters reporting, with 64% of surveyed hawaladars in a UNODC study never disclosing transactions to authorities due to loyalty and opacity.^[2] Enforcement weaknesses are compounded by corruption and institutional fragility in origin countries, where hawala intersects with illicit economies. In Afghanistan, for instance, hawaladars have facilitated opiate trafficking proceeds and insurgent payments, including to groups like the Taliban, amid bribery networks that undermine regulatory efforts.^[2] Despite post-9/11 licensing mandates under FATF standards, actual prosecutions remain rare, with many jurisdictions imposing sanctions like fines or imprisonment but applying them infrequently over multi-year periods.^[3] Digital adaptations have eroded gains from heightened post-9/11 scrutiny, which initially emphasized licensing and monitoring but failed to anticipate shifts to encrypted messaging apps and cryptocurrencies for evasion. Hawaladars increasingly use platforms like Telegram for micro-transactions below reporting thresholds or integrate crypto conversions to obscure trails, as noted in recent FATF warnings on terrorist adaptations to digital infrastructure.^[91] Such evolutions exploit supervisory resource shortages, with only limited crypto adoption (4% among surveyed operators) but growing awareness signaling broader risks.^[2] Policymakers face trade-offs where stringent regulation risks alienating legitimate users reliant on hawala for financial inclusion in underserved regions, potentially driving activity further underground, while lax enforcement sustains threats from criminal and terrorist financing.^[92] This tension persists amid calls for risk-based approaches, yet causal factors like entrenched informality and geopolitical instability in high-use areas continue to limit effective closure of gaps.^[3]

Broader Impacts and Debates

Empirical Economic Data on Legitimate vs. Illicit Flows

Hawala facilitates a substantial volume of legitimate remittances in regions with limited access to formal banking, particularly in South Asia, the Middle East, and the Horn of Africa, where it offers lower transaction costs compared to official channels averaging 6.3% for $200 transfers as of Q3 2022.^[93] In Somalia, personal remittances received equaled 14.85% of GDP in 2023, with informal systems like hawala handling the majority of these flows due to the absence of reliable formal alternatives.^[62] Similarly, in Pakistan, remittances constitute around 8-10% of GDP annually, and hawala networks support a portion of these by enabling rapid, undocumented transfers from migrant workers in the Gulf states.^[33] These legitimate uses provide economic stability in aid-dependent economies, smoothing household incomes and funding consumption without the overhead of regulatory compliance.^[53] Quantifying the precise global scale of hawala-mediated remittances remains challenging due to their informal nature, but estimates suggest they form a meaningful subset of the $865 billion in total international remittance flows recorded in 2023, concentrated in corridors avoiding high formal fees.^[40] International organizations like the IMF and World Bank have documented hawala's role in migrant remittances since the early 2000s, noting its efficiency in reducing costs to below 1-2% per transaction in some networks, thereby enhancing net inflows to recipient households compared to bank wires or money transfer operators.^[5] In Afghanistan, for instance, up to 90% of financial transactions, including remittances supporting livelihoods, occur via hawala, underscoring its dominance in fragile states where formal systems capture only marginal activity.^[94] Illicit flows through hawala are empirically harder to measure, as they evade recording by design, but regulatory bodies like the FATF assess that such networks are not primarily structured for criminal purposes and that abuse for money laundering or terrorist financing represents a minority of activity, often exaggerated in anecdotal reports.^[3] UNODC studies indicate that while hawala enables some opiate trafficking proceeds or sanctions evasion, surveyed hawaladars reject the majority of suspected criminal transactions, with legitimate trade and personal transfers comprising the bulk.^[2] No comprehensive global percentage exists, but case-based evidence from FATF typologies links hawala to isolated instances of illicit financing, such as migrant smuggling proceeds, without evidence of systemic dominance over legitimate volumes.^[95] Causally, hawala's informality undermines formal economic metrics by diverting flows from taxable channels; hawaladar fees and principal amounts remain unrecorded, reducing government revenue from indirect taxes like VAT and eroding the monitored tax base in transit economies.^[96] This evasion effect is evident in studies of informal value transfer systems, where parallel hawala markets parallel formal ones but capture untaxed service margins, imposing indirect costs on public finances equivalent to foregone fiscal capacity.^[5] Net economic assessments balance these legitimate efficiency gains—such as faster capital access in remittance-dependent states—against heightened intelligence and enforcement burdens, though verifiable data on the latter's scale remains limited to qualitative regulatory reports rather than quantified aggregates.^[3]

Policy Trade-offs: Inclusion vs. Security

Hawala's informal structure facilitates financial inclusion by enabling low-cost remittances for migrant workers and unbanked populations in regions with limited formal banking, such as parts of South Asia and the Middle East, where traditional systems like Western Union impose higher fees and require documentation.^[5] However, this same anonymity and lack of paper trails heighten security risks, as transfers rely on trust networks without mandatory reporting, allowing commingling of legitimate funds with proceeds from crime or terrorism.^[23] Policymakers face a core tension: unregulated access promotes economic flows vital for poverty alleviation, yet empirical cases of hawala facilitating organized crime underscore the causal link between opacity and illicit exploitation.^[58] Advocates for stringent regulation prioritize counter-terrorism and anti-money laundering, citing post-9/11 enforcement in the US and UK that imposed licensing on informal providers, compelling many to formalize or exit, thereby disrupting documented terror finance channels linked to hawala.^[90] These measures, aligned with FATF standards, mandate customer due diligence and transaction records for hawala-like services, reducing vulnerabilities but elevating operational costs that deter small-scale operators serving low-income users.^[23] Critics from inclusion-focused perspectives, often in development-oriented reports, argue such crackdowns disproportionately harm legitimate remitters—evident in Somalia, where AML pressures threatened a $2 billion annual inflow essential for household survival—potentially driving users underground rather than eliminating risks.^[97] Claims minimizing hawala's illicit prevalence are countered by enforcement data, including repeated busts of networks funding drug cartels and extremism, as in India's ongoing operations under FEMA treating unauthorized hawala as criminal, revealing layered global routes for terror financing.^[98] ^[99] While some academic analyses exhibit reluctance to emphasize security threats, potentially reflecting institutional biases toward cultural relativism over empirical risks, right-leaning policy views assert that national security imperatives outweigh unregulated inclusion, as unchecked systems inherently enable adversarial actors to exploit dual-use channels without traceability.^[100] Debates encompass outright bans, as proposed in high-risk contexts like India to curb sanctions evasion and extremism, versus integration through supervised licensing that preserves access while imposing oversight.^[101] Formalization efforts, such as FATF-compliant registries, aim to balance these by channeling legitimate volumes into monitored frameworks, though persistent gaps in enforcement—due to hawala's borderless nature—highlight that causal oversight remains essential to mitigate anonymity-driven abuses without forsaking underserved populations.^[23]

Future Prospects and Digital Evolutions

Emerging integrations of hawala with blockchain and cryptocurrencies represent a hybrid model that preserves the system's core informality while leveraging digital tools for settlement and transfer. In these setups, traditional hawala brokers may use stablecoins or decentralized ledgers to balance debts across borders, reducing reliance on physical cash couriers but complicating traceability due to pseudonymity features in crypto wallets combined with hawala's trust-based opacity.^[102]^[103] A September 2025 analysis highlights how such hybrids enable cross-border laundering by layering crypto conversions atop hawala networks, evading conventional banking scrutiny.^[102] These digital evolutions pose dual challenges for oversight: while blockchain's immutable records offer potential audit trails, hawala's off-chain verbal agreements and informal settlements undermine full visibility, allowing operators to obscure illicit intent amid legitimate remittances. Reports from 2025 indicate rising adoption in high-migration routes, such as those linking South Asia to the Gulf or Africa to Europe, where digital hawala apps facilitate rapid, low-cost flows amid volatile fiat systems.^[2]^[23] For instance, terrorist groups like the Islamic State have exploited digital hawala variants since at least 2024, routing funds through encrypted apps and crypto mixers to fund operations.^[104] Regulatory lags exacerbate persistence, as many jurisdictions' anti-money laundering frameworks, updated through 2025, inadequately address hybrid systems lacking centralized ledgers or KYC mandates.^[105] However, advancements in AI-driven surveillance could narrow these gaps by pattern-matching anomalies like irregular transfer volumes or network clustering indicative of hawala cycles, as piloted in regions with high informal finance prevalence.^[106] FATF guidance from 2023 onward emphasizes risk-based monitoring for such evolutions, yet enforcement remains fragmented, potentially enabling formalization efforts—such as licensing digital value transfer providers—only if paired with international data-sharing protocols.^[23] Without robust controls, these trends risk amplifying hawala's vulnerabilities to sanctions evasion and terror financing, as digital scalability extends reach beyond traditional ethnic networks. Balanced against this, proponents argue hybrids could evolve into regulated fintech corridors for underserved populations, provided traceability mandates override anonymity defaults; empirical gaps in 2025 data underscore the need for targeted studies on legitimate versus illicit digital flows.^[103]^[95]

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[66]
[PDF] Institutional change in livestock trade in Somaliland after 1991
This is probably different from the cross-border trade within the Horn of Africa since, often times, actors involved in cross-border trading belong to the same ...
[67]
[PDF] Institutional change in livestock trade in Somaliland after 1991
The franco valuta persisted in the early 1990s when, in the absence of hawala, small-scale livestock exporters to Yemen gave their cash to commodity importers ...
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CHAPTER 30 Hawala and Other Informal Payment Systems
“A client who wants to send funds overseas contacts someone at a store, who will take the cash, make an entry in a ledger book, and then telephone another ...Missing: senders | Show results with:senders
[69]
Monrovia Man Found Guilty in 'Hawala' Scheme to Move Money for ...
Jan 23, 2018 · Monrovia Man Found Guilty in 'Hawala' Scheme to Move Money for International Drug Trafficking Organizations, Included Drug Cartels. Tuesday ...Missing: UNODC | Show results with:UNODC
[70]
[PDF] Trade-based Money Laundering: Trends and Developments - FATF
Typical TBML methods identified included the over- and under-invoicing of goods and services, multiple billing of goods and services, fictitious trades, the use ...
[71]
[PDF] 9/11 Commission - Terrorist Financing
After the September 11 attacks, the highest-level U.S. government officials publicly declared that the fight against al Qaeda financing was as critical as the ...
[72]
[PDF] Al Qaeda's Means and Methods to Raise, Move, and Use Money
That said, al Qaeda still appears to have the ability to fund terrorist operations. Intelligence Issues. There is much that the U.S. government did not know ( ...
[73]
THE FINANCIAL FRONT OF THE WAR ON TERRORISM - Treasury
The first phase of the financial front of the war on terrorism was dominated by public designations of terrorists and terrorist supporters and attempts to ...
[74]
Treasury Designates Transnational al-Shabaab Money Laundering ...
Mar 11, 2024 · The US Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions on 16 entities and individuals who compose an expansive business ...
[75]
Al-Shabaab's Financial Network - Rewards For Justice
Rewards for Justice is offering a reward of up to $10 million for information leading to the disruption of the financial mechanisms of the terrorist ...
[76]
What Is Known About ISIS-K Funding in Afghanistan? - Lawfare
Aug 30, 2021 · This means that the Taliban could disrupt flows to ISIS-K via hawalas if, for instance, it is willing to effectively supervise the hawala ...
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[PDF] Overseas Contingency Operations - Treasury Inspector General
Aug 17, 2021 · Khorasan (ISIS-K)6 funding in Afghanistan, the estimated amount of funds at ... financial relationships between the Taliban and ISIS and its ...
[78]
How Iran will cope with US sanctions - Atlantic Council
Nov 5, 2018 · Iranian nationals also rely on hawala, or havaleh in Persian, a traditional form of banking in which a sarafi or currency exchange transfers ...
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[PDF] FinCEN Advisory Iran Backed TF
May 8, 2024 · On March 9, 2023, OFAC sanctioned 39 entities constituting a significant “shadow banking” network, one of several multi-jurisdictional illicit ...
[80]
[PDF] Complex Proliferation Financing Sanctions Evasions Schemes - FATF
Jun 9, 2025 · In June 2024, OFAC sanctioned nearly 50 entities and individuals that constitute multiple branches of a sprawling “shadow banking” network used ...
[81]
OFAC penalises use of hawala in Iranian trade.
Nov 20, 2024 · UAS's OFAC imposes USD1.1 million penalty on an individual for 75 breaches of the Iranian Transactions and Sanctions Regulations.
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Guidance for a Risk-Based Approach for Money or Value Transfer ...
Money or Value Transfer Services (MVTS) play an important role in the international financial system and in supporting financial inclusion.
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Countries - FATF
Over 200 jurisdictions around the world have commited to the FATF Recommendations through the global network of FSRBs and FATF memberships.FATF member economies · "Black and grey" lists · Pakistan · India
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FATF report highlights evolving terrorist financing risks and warns of ...
Jul 8, 2025 · The report, Comprehensive Update on Terrorist Financing Risks, reveals terrorists' persistent ability to exploit the international financial ...<|separator|>
[85]
The Hawala System in Pakistan: A Catalyst for Money Laundering ...
Nov 10, 2017 · In June 2004, the State Bank of Pakistan notified all hawaladars to register as authorized foreign exchange dealers and to establish minimum ...Missing: rules post-
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[PDF] Money Laundering and Financial Crimes 355 Pakistan - State.gov
Jul 22, 2007 · Despite the State Bank of Pakistan's efforts, unlicensed hawaladars still operate illegally in parts of the country (particularly Peshawar and.
[87]
How Does Hawala Pose High Money Laundering Risks?
Nov 5, 2024 · Hawala poses risks due to its anonymity, lack of records, limited due diligence, cash transfers, and lack of regulation, making it hard to ...Hawala System In A Nutshell · Legitimate Hawala... · Hawala Categorized By...Missing: procedure | Show results with:procedure
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Registered Hawala Providers Regulation | CBUAE Rulebook
The objective of this Regulation is to provide a regulatory framework for Hawala Providers in the UAE in order to operate within the UAE financial sector in ...
[89]
7. Challenges of Regulating and Supervising the Hawaladars of ...
In September 2004, Da Afghanistan Bank, the country's central bank, introduced legislation to regulate and supervise the activities of money service ...
[90]
Regulatory Frameworks for Hawala and Other Remittance Systems
Hawala has certainly been used to transfer militants' funds, but it is not the most important vehicle. Assumptions about a centrally and rationally organized al ...Missing: controversies | Show results with:controversies
[91]
Digital hawala poses new laundering risks - The Banker
Jul 16, 2025 · Digital hawala apps ... In July, the Financial Action Task Force warned that terrorist groups are adapting to digital payment infrastructure.Missing: adaptations encrypted
[92]
Trust in Transition: Afghanistan's Hawala System in Crisis ... - CGAP
Nov 19, 2024 · This paper concludes that hawala networks should not merely be viewed as a stopgap measure in Afghanistan's current financial crisis but as a fundamental and ...
[93]
Remittances: Background and Issues for the 118th Congress
May 10, 2023 · This report focuses on remittances, the transfers of money and capital sent by migrants and foreign immigrant communities to their home countries.
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[PDF] CURBING ILLICIT FINANCIAL FLOWS IN AFGHANISTAN
Approximately. 90 percent of financial transactions go through the informal hawala system. They are the preferred choice for ordinary Afghans, but also for ...
[95]
[PDF] Money Laundering and Terrorist Financing Risks Arising ... - FATF
For the movement of illegal profits from Greece to foreign countries the criminal network used, two ways, namely: The non- bank money system called «hawala» and ...
[96]
V Economic Analysis of Informal Hawala Transactions in - IMF eLibrary
The structure of a monetary survey suggests that almost nothing in hawala remittances or other IFT systems has significant effect on the components of overall ...<|separator|>
[97]
Anti-Money Laundering Regulations: Can Somalia survive without ...
Feb 11, 2014 · About 800,000 Somalis live abroad (out of a total population of 9 million). According to a recent survey, on average, Somali migrants send $2, ...Missing: unbanked | Show results with:unbanked<|separator|>
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How 'hawala' impacts national security - Gateway House
Nov 8, 2024 · The hawala system to move funds globally for terrorist financing is huge, secretive, and layered—and a challenge for national security agencies ...Missing: proposals risks
[99]
EAGLE arrests hawala kingpin linked to Nigerian drug cartels ...
Oct 11, 2025 · The arrest is being seen as a significant breakthrough in dismantling an extensive hawala network supporting international drug trafficking, and ...
[100]
Financial superstitions: Hawala accusations and boundary-making ...
Apr 21, 2022 · The hawalakaand (hawala scandal) was then India's most notorious financial scandal, implicating top parliamentarians across party lines for ...
[101]
A Complete Guide to Hawala Money Laundering - KYC Hub
Learn how hawala money laundering works, its risks, legal issues, and global impact in this quick guide to informal money transfer systems.
[102]
The Role of Hawala and Informal Value Transfer Systems in Cross ...
Sep 9, 2025 · This paper critically examines how hawala networks are increasingly integrated with cryptocurrencies to launder proceeds of crime and evade ...Missing: bureaus | Show results with:bureaus
[103]
Hawala Blockchain Fundamentals: The Emerging Nexus of Illicit ...
This paper delves into the fusion of blockchain technology with the traditional hawala system, highlighting the transformative potential of their intersection.Missing: hybrids | Show results with:hybrids
[104]
Digital Hawala System Is Another Route for Islamic State to Fund ...
Oct 7, 2025 · The center relies on banks, other financial institutions and civilians to report any suspected terrorist financing and money laundering. When it ...Missing: pilots 2020s
[105]
How Hawala Became a Core Enabler of Financial Crime - LinkedIn
May 28, 2025 · Used by professional money launderers to move criminal proceeds through opaque, cross-border structures. Exploits jurisdictional gaps, ...
[106]
Hidden Risks of Hawala: A Global Financial Blindspot - LinkedIn
Dec 30, 2024 · AI can analyse vast datasets to detect anomalies, such as repetitive transfers with no business justification or patterns resembling Hawala ...