This document discusses Hawala banking, an informal money transfer system originating in Asia and the Middle East. Hawala allows money to be transferred without physically moving it by using a network of brokers who manage credit balances. It is commonly used for remittances but also to transfer funds illegally for purposes like tax evasion, sanctions evasion, and terrorism financing. The document outlines how Hawala transactions work, who uses the system, and challenges for regulation and law enforcement.

1. “HAWALA-BANKING”
Geert DELRUE
Detective Commissioner
Belgian Federal Criminal Police
© G.DELRUE

2. TYPOLOGY
HAWALA
© G.DELRUE

3. “HAWALA-BANKING” -
Contents of the exposé
 HAWALA-WHAT
 HAWALA-WHO
 HAWALA-HOW
 HAWALA-WHERE
© G.DELRUE

4. HAWALA-WHAT
“HAWALA”
OTHER DENOMINATIONS
 „Hawala’ means ‘transfer’ – ‘certificate’
 ‘Hundi’ in Pakistani and means ‘trust’
 ‘Fei-chien’ in Chinese and means ‘flying money’
 ‘Padala’ in Filipino
 ‘Nging sing kek’
 ‘PHOW kuan’
 ‘Chiao hui’
 ‘Hui kuan’
 ...
© G.DELRUE

5. HAWALA-WHAT
“HAWALA-BANKING” Western Union Ad Warning
Potential Hawala Users
OTHER DENOMINATIONS
 underground banking
 informal money transfer system
 ethnic banking
 informal financial services
 informal value transfer system
 alternative remittance system
 ….
 typology for money laundering
© G.DELRUE

6. HAWALA-WHAT
“HAWALA-BANKING”
ORIGIN:
 traditional way of banking, from Asia and the
Middle-East, originating from silk route between
Asia and Europe
 existed already before our actual Western system
 its pratical use is mainly for legitimate business
and innocent transactions (personal investments,
traveler costs, medical costs, education, financial
support of family in the homeland, ….. BUT
 is also misused
© G.DELRUE

7. HAWALA-WHAT
“HAWALA-BANKING”
The Eastern Western Union
DESCRIPTION
Hawala is an informal money
transfer system and a basic means of
transferring sums of money through
the whole world in a safe and
paperless way
© G.DELRUE

8. TYPOLOGIE
HAWALA-WHAT
“HAWALA-BANKING”
TWO SORTS:
1. Hawala as supplemental activity by
merchants
e.g. telephone shops, food supply shops,
nightshops, …
2. Hawala as a part from professional informal
bankers
© G.DELRUE

9. TYPOLOGY
HAWALA-WHAT
The UK-Nigeria Remittance Corridor
The U.S.-Guatemala Remittance Corridor
The Netherlands-Morocco Remittance
Corridor CORRIDORS
The Netherlands-Suriname Remittance
Corridor
The Germany-Serbia Remittance Corridor
The Italy-Albania Remittance Corridor
The Canada-Vietnam Remittance Corridor
The U.S.-Mexico Remittance Corridor
Phone-house, “call houses”,
fax, gsm fax, gsm
sender beneficiary
sender MTO
MTO beneficiary
sender …and vice versa beneficiary
Underground
financial centra CORRIDORS
F.i. Karachi, Dubai
© G.DELRUE

10. TYPOLOGIE
HAWALA-WHAT
Which payments?
LEGAL
 financial support of family
 legal trade
 payment of ZAKAT
 ...
© G.DELRUE

11. TYPOLOGIE
Which payment? HAWALA-WHAT
ILLEGAL
 capital flight
 tax fraud (import duties, excise duties, income
tax, …
 terrorism-financing
 evasion of currency restrictions
 drugs- and human-smuggling
 evasion of international sanctions and
embargos
 payments in the informal economy
 ….
©
G.DELRUE

12. TYPOLOGY
Which customers? HAWALA-WHO
 foreigners
 illegals
 foreign people who have a legal status, but
prefer familiarity and efficiency
 people who got money from illegal activities
 etnicity: Nigerians, Pakistanis, Afghans, ...
 international organisations and NGO`s
 immigrant-workers
 …
© G.DELRUE

13. TYPOLOGY
HAWALADARS HAWALA-WHO
 foreigners
 money-transmitters (bankers)
 usually merchants: call-houses, traveling
agencies, jewelers, food stores, …
 supplementary activities: change of
currency, money lending
 …
© G.DELRUE

14. TYPOLOGIE
Characteristics- voordelen? HAWALA
 currency / payment in euro
 efficiency / quickness
 user-friendly
 reliable
 no legal restraints, e.g. KYC
 family, friends, more social control
 mistrust of formal authorities in the homeland
 low transaction costs / favorable exchange
rates
 … © G.DELRUE

15. TYPOLOGY
HAWALA
Charateristics – Misuse - RISCS?
 small risc of getting caught by the
autorities
 no obligation for identification –
anonymity
 no paper-trail
 difficult detection (no physical money
remittance)
 trust
 ... ©
G.DELRUE

16. TYPOLOGY
HAWALA-HOW
HOW DOES IT WORK?
Sender A, banker A’, banker B’, beneficiary B
• A gives 100 euro to A’, with the request to
transfer the money to B
• A’ calls in B’ and B’ pays the sum to B
(euro or local currency)
• B’ has a credit on A’: solution through balancing,
by:
a) transactions to and fro,
b) physcial correction,
c) flow of goods from B’ to A’
Balancing: besides moving also changing © G.DELRUE

17. COURIER
Scheme? COURIER
HAWALADAR A’
SENDER A €100 BELGIUM
other “hawaladar”
owner transfer services € 95
telephone, fax, e-mail, … CASH COURIER and/or
BALANCING
CASH COURIER
HAWALADAR B’
HOME-LAND
BENEFICIARY B €90
COURIER © G.DELRUE
COURIER

18. TYPOLOGY
HAWALA-HOW
TRANSFER
central bank
bank of the bank of the
sender SWIFT beneficiary
sender beneficiary
Money-transfer (wire transfer)
through
the bank (correspondent banking) SWIFTG.DELRUE
©

19. TYPOLOGY
HOW DOES IT WORK? HAWALA-HOW
Example of a “one way” transaction
family/sender
$
Hawaladar
spoken exchange
(sum, transaction code
usually no money)
Paperless
Hawaladar
Difficult detection
$
Posibble in both ways beneficiary/family
Based on trust
© G.DELRUE

20. TYPOLOGIE
HAWALA-HOW
BALANCING
Dependent of some elements:
 nature of the client
 quantity of the money
 relation with the customer
 background activities of the
hawaladars
© G.DELRUE

21. TYPOLOGIE
HAWALA-HOW
BALANCING MONEYSTREAM TO AND FRO
Ways of getting the money to the homeland
 ‘cash couriers’ (professionals or as a favor) –
physical transport
 hiding of the money in goods, which are
shipped
 transfer through the formal banking system
 mixture of legal and illegal funds
 through trade in goods, such as…
… ©
G.DELRUE

22. TYPOLOGY
HAWALA-HOW
BALANCING VIA TRADING IN GOODS
 2d hands clothing
 cars and working tools
 agrarian products
 electronics
 package materials
 animal food
 beer
 goods with a great value, e.g. diamonds
 …. ©
G.DELRUE

23. TYPOLOGY
HAWALA
© G.DELRUE

24. TYPOLOGY
Afghanistan HAWALA
Dubai
© G.DELRUE

25. TYPOLOGY
HAWALA-HOW
WAYS OF KEEPING THE BOOKS
© G.DELRUE

26. TYPOLOGIE
HAWALA-HOW
WAYS OF KEEPING THE BOOKS
© G.DELRUE

27. TYPOLOGY
HAWALA-HOW
WAYS OF KEEPING THE BOOKS
© G.DELRUE

28. TYPOLOGY
HAWALA-HOW
Characteristics of “terrorism financing”
Transactions by terrorists are usually unique and
with large amounts of money (aid by states,
donations from sympathisants, legal economic
activities and criminal activities) and the use of
underground networks which play an essential
role in their activities
This in contrast with other payments by workers-
migrants which happen more often to family and
in smaller amounts ©
G.DELRUE

29. TYPOLOGIE
HAWALA
Characteristics of “terrorism financing”
Hawala is an informal money transfer system, a
means of sending money through the whole
world in a safe and paperless manner
Islamic Banking carried out as described in the
Koran, is used for legal money collection and
payment. This is particularly in the case of
ZAKAT FUNDS
© G.DELRUE

30. TYPOLOGIE
ZAKAT HAWALA
“Take from their wealth a portion for charity,
in order to clean them thereby, and sanctify them.”
 Zakat is a form of giving
Giving Bread charity for the benefit of the
and Milk poor and the preach (learning)
of the Islam
 According to the Koran every
Muslim must give 2,5% of his
fortune, on top of what he
needs himself © G.DELRUE

31. TYPOLOGY
ZAKAT HAWALA
Ukrainian mosque  Zakat is given at the beginning
Built with Zakat
funds of the month of „Muharram‟,
which indicates the beginning
of the moon newyear
 Zakat is one of the five
keystones of the Islam and is
considered as the basis of
social justice and prosperity in
the Muslim-world
© G.DELRUE

32. CONCLUSION HAWALA
POINTS OF INTEREST:
- during a house search : fax-, telephone-
and portable-accountants
- separate notes of bookkeeping
- outprints from fax-traffic
- maybe already bookkeeping on the
computer or e-mail-traffic
- …
© G.DELRUE

33. © G.DELRUE