What is Hawala?

March 24, 2025

The use of hawala networks has surged in recent years, particularly for illegal activities such as poaching and money laundering. An investigation revealed that a poaching network in central India has exploited these informal money transfer systems to facilitate the killing of tigers.

What is Hawala?

Hawala is an informal method of transferring money without physical cash.
It operates on trust and relies on a network of brokers known as hawaladars.
These brokers facilitate transactions through informal channels.
Although it lacks regulation, hawala is widely used due to its convenience.

How Does Hawala Work?

In a typical hawala transaction, a sender deposits money with a hawaladar in one location. The sender receives a token, which is shared with the recipient. The recipient then visits a local hawaladar to collect the funds. This process allows money to be transferred without it physically moving between locations.

Users of Hawala

Hawala is popular among migrant workers for sending remittances home. Many individuals in regions with limited banking access prefer hawala due to its simplicity. However, it is also used for illegal activities, including drug trafficking and terrorism financing, due to its anonymity.

Cryptocurrency

Recent developments have introduced cryptocurrencies like USDT into hawala transactions. USDT, a stablecoin, allows for easy and discreet transfers across borders. Individuals can buy USDT with cash and then sell it in another jurisdiction, bypassing traditional banking systems. USDT is favoured for hawala transaction due to its stability and liquidity. It does not experience price fluctuations, making it ideal for transactions. Furthermore, it can be used in crypto-friendly regions, facilitating seamless transfers without regulatory scrutiny.

Legal Implications

While hawala itself is not inherently illegal, its association with illicit activities has led to increased scrutiny. Many jurisdictions have banned hawala transactions due to their potential misuse. However, the networks continue to operate, adapting to new technologies like cryptocurrency.

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