Definition

"Hawala (also known as hundi) is an informal value transfer system based on performance and honor of a huge network of money brokers which are primarily located in the Middle East, Africa and Asia." (http://en.wikipedia.org/wiki/Hawala)

Description

"For those unfamiliar with a hawala system, a hawala money transfer is a way to send money via a hawaladar or hawaladars, usually across long distances, at a far lower cost than sending money by wire or bank transfer. Hawala banking with hawala transactions and hawaladars have been used for thousands of years, mostly among African, Asian and Middle Eastern cultures. Although the advent of modern banking has made hawala banking less common than before, the introduction of severe restrictions to banking privacy through legislation and enforcement has made a hawala system via a hawala network is a very attractive option again for privately transferring money.

The transfer of money via a hawala banking system is extremely private and is unlikely to be reported or discovered by anyone other than the hawaladar, the transferor and the tranferee. In the hawala system, hawaladars are the brokers or facilitators of the transaction. This transactional privacy has made hawala banking an evil villain for enemies of personal privacy and financial privacy.

The most common use for a hawala system is to send hawala money transfers to another person who is at a great distance from you. For hawala transactions, the money sender contacts a local hawaladar and gives him the money he or she wants to send. The hawladar then contacts another hawaladar in the destination city for the money and arranges to have the hawaladar in the destination city turn over the money to the recipient, minus a small fee. In the hawala transactions no money actually physically travels the distance at that time but the hawaladars keep a tally of the total owed and then settle the difference at a later date. The exact methods can differ greatly from hawala network to hawala network but this is the general overview of how hawala banking works." (http://www.howtovanish.com/2009/09/modern-hawala/)