In addition to serving as a tutorial on hawala transaction, this paper will also discuss the way in which hawala is used to facilitate money laundering. In a prototype hawala transaction figure 1, an expatriate worker ca uses a hawaladar ha to arrange a remittance to his home country. Since many hawala transactions legitimate and illegitimate are conducted in the context of importexport businesses, the manipulation of invoices, as discussed above, is a very common means of settling accounts after the transactions have been made. An analysis of the informal hawala system world bank documents. Second, with these red flags in hand, it can be determined whether. In india a hawala transaction is punishable under the fema foreign exchange management act 2000 and pmla prevention of money laundering act 2002. One definition from interpol is that hawala is money transfer without money movement. A guidance to understand hawala and to establish the nexus. The recipient can receive the funds without producing identity documents other than. Origins and practical applications michael bates intl453 b001 prof. Hawala are informal money transfer companies that transfer funds both. The basic hawala transaction involves a sender, two trusted intermediaries, and a recipient. While hawala transactions are mostly initiated by emigrant workers living in a developed country, the hawala system can also be used to send funds from a developing country, even though the purpose of the funds transfer is usually different. The fact that hawala circumvents amlctf measures to facilitate both.
It is a form of financial transaction developed in india and later spread across middleeast and northern africa. In india a hawala transaction is punishable under the fema foreign exchange management act 2000 and. Hawala is a method of transferring money without any actual movement. Although hawala, as a method of informal value transfer, was the initial point of interest after 911, a wide range of methods and networks operate in similar ways and perform analogous services or functions. A case study on the misuse of hawala banking request pdf.
As we will see, the delivery associated with a hawala transaction is faster and more reliable than in bank transactions. Hawala 1 is an alternative or parallel remittance system. Informal value transfer systems, terrorism and money. A hawala remittance transaction takes place within one or two days. A case study on the misuse of hawala banking article in international journal of social economics 35september. The role of hawala and other similar service providers in.