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Dealing with Hawala: Informal Financial Centers in the Ethnic Community

NCJ Number
FBI: Law Enforcement Bulletin Volume: 76 Issue: 2 Dated: February 2007 Pages: 10-14
James Casey M.A.
Date Published
February 2007
5 pages
This article describes the operation of Hawala, an informal value transfer system (IVTS).
Hawala is a first choice for individuals who may be violating the terms of their visas by working or are in the country illegally. Techniques for regulating and investigating Hawala transfer systems are presented that include the investigation of unconventional records or records kept in other languages as well as the investigation of large transactions involving food stamps, lottery tickets, and phone cards. Hawala is a type of IVTS used by members of ethnic communities, particularly America’s Middle Eastern and Southeast Asian communities, to send money around the world. It is important that law enforcement officers who investigate white-collar crime or terrorism financing be familiar with Hawala and other nontraditional and informal financial transfer systems. Hawala does not involve the immediate movement of funds but instead works more like an informal system of wiring money. The Hawala system functions when one vendor accepts funds from the sender and another gives the same amount to the recipient. The two vendors involved in the transfer settle up at a later time. Hawaladars (vendors) may travel overseas on a regular basis to settle accounts in person. While the global scope of Hawala is impossible to calculate, an International Monetary Fund/World Bank estimate suggests worldwide IVTS transfers of tens of billions of dollars annually. Hawala is used for both legitimate and criminal purposes. Legitimate purposes include the transfer of money to relatives living overseas while criminal purposes may include the financing of terrorist organizations. Endnotes