Hawala

Introduction

This is an alternate form of remittance system popular in India. Hawala is a means of transfer of money based on trust or reference. Generally, the charges for transferring money under hawala are much lower than the normal bank charges. The broker or dealer is called the hawaladar. This system includes the addition or transfer of money by manipulating the invoices to conceal the movement of money in the shipment of goods and the smuggling of gold. 

• The hawala system is said to facilitate criminal activities because of its anonymity, speed and absence of paper trail. Thus criminals, drug traffickers, corrupt officials and politicians use this method to transfer their wealth for laundering purposes. 
• In recent times, cryptocurrencies are becoming a new source of Hawala. Because this new Hawala has the potential to become an easy means to send funds to terrorists and other illicit activities, proper regulation of bitcoin is required in the interests of the economy and national security. 
• Bitcoin, for example, enables complete anonymity and encourages terrorist financing, as evidenced by the Paris terrorist incident (2015). Following the government of India’s demonetisation operation in 2016, a flood of such digital transactions was observed.