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1. Hawala : The Banking
System of Al-Qaeda
Iakovos Alhadeff

2. Hawala is the shadow banking system used by terrorist and crime
organizations. It is also called Hewala or Hundi. See Wikipedia “Hewala”.
https://en.wikipedia.org/wiki/Hawala
Hawala is a shadow banking system that works without actual transfers of
money, without issuing invoices, cheques etc. At the following Wikipedia
picture you can see a typical Hawala transaction.
https://en.wikipedia.org/wiki/Hawala#/media/File:Hawala.png
As you can see from the picture, person A in city A, wants to send money
for some criminal activity to person B in city B. He does not want to use the
banking system because his transaction will be traced. Therefore person A
goes to broker X, who is a Hawala agent in city A, and gives him 1 kilo of
gold. Agent X asks the Hawala agent M, who is his connection in city B, to
give person B 1 kilo of gold, or diamonds, or whatever. This transaction can

3. not be traced by the secret agencies, even though they know the large
Hawala agents.
Of course the Hawala shadow banking system has some disadvantages. For
example transactions occur without issuing any supporting documents i.e.
invoices, cheques etc, and in some cases the Hawala agents might not
manage to honor these transactions, either because they went bankrupt or
because they were robbed etc, and violence will follow. Hawala was Al-
Qaeda’s favorite payment system.
The 500 euro note is the criminals’ favorite note, and that’s the reason it will
probably go out of circulation. See for example Telegraph “500 euro notes
withdrawn over organised crime fears”, May 2010
http://www.telegraph.co.uk/news/uknews/crime/7714809/500-euro-notes-
withdrawn-over-organised-crime-fears.html