Can someone please explain how exactly a Hawala transaction works ? How do people use it to hide their black money ?

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Can someone please explain how exactly a Hawala transaction works ? How do people use it to hide their black money ?

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It works similar to a bank transaction, except it’s human brokers talking to each other on the phone, rather than banks sending electronic messages. Here is the complete explanation:
https://en.wikipedia.org/wiki/Hawala#How_hawala_works

It can be used to move criminal money because there is no involvement of official banks, and no electronic record. it does not sounds like they need ID’s either. But police can still get brokers to talk if they can find them.

It’s very family/clan oriented. You go to a guy in your town who is part of the network (called a hawaladar) and tell him you want to send money to your relative in another city or another country. He quotes you a fee and exchange rate if any. You give him the agreed upon amount and he gives you a name, address and password that you give to your relative.

When you leave, he calls the contact he told you about. Usually a cousin or in-law relation. They trade info about any funds being sent back and forth. Now the cousin knows to expect your relative and how much to give them.

Your relative goes to the address you gave them, provides the password and gets the funds you paid to have sent.

A couple times a year, the hawaladars go over the records and arrange to have settlement payments made so it all comes out even. It’s all informal and highly based on honor.

These days, it uses cellphone calls and text messages. The key thing is it does not use established, regulated and monitored banking networks like SWIFT.

Because of the way it works and the lack of oversight, extremist and terrorist groups can and do use this method to move funds. However, because it is so highly honor based, a hawaladar who knowingly handles terrorist money can find themselves kicked out of the network. In the worst case scenario, it could even trigger clan feuds with people getting blown up or shot to satisfy honor.