What is Hawala? An Introduction to the Multi-Billion Dollar Informal Value Tranfer System

Abstract

Every year billions of dollars are transferred across countries and continents using informal value transfer systems (IVTS). The IVTS is any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, or not in the same form. Hawala is one of the key forms of IVTS. IVTS were established means of transferring valuables and money long before any of the formal methods were conceived (Holt et al. 1970; Lewis 1995). Much is unknown about IVTS, e.g., its size, its exact method of operation, and consequently, measures needed to control its expansion. Regulation and monitoring of IVTS remain a difficult task due to the sketchy paper trail left by IVTS transactions. Although many countries have put in place regulations to check these transfers, incongruities in these various national legislations render the task of monitoring and regulation complex and unwieldy.