What is hawala?

If you’ve ever looked into transferring money abroad, there’s a good chance you’ll have heard or seen the word hawala mentioned somewhere. There’s also a good chance you don’t know exactly what it is or whether it’s safe to use.

Hawala is the common name for a very ancient method of transferring money that Interpol defines as ‘money transfer without money movement’. That mention of Interpol may give you a clue that hawala isn’t strictly above board or even legal as a foreign exchange system in many countries and regions – but before we get to that: what it is and how it works.

How does the hawala system work?

Although hawala is its most common name, it goes by several others in different countries and cultures – havaleh in Persian, hundi in Hindi and xawala or xawilaad in Somali, for example. You may also hear it referred to as ‘underground banking’ thanks to its association with more nefarious activities.

Founded sometime around the eight century in Asia, hawala is still popular across the world and in particular with migrant workers and poorer countries where access to banks and reliable financial services is hard to come by or simply too expensive. Instead, they use a vast global network of dealers, called hawaladars, to arrange the exchange of money from one place to another. Let’s give you an example of how it works:

In Jakarta, Indonesia a migrant hotel worker wants to send some of his wages home to his mother in Manama, Bahrain. But he has no bank account and so heads to a local store in the city where he hands over his wages in rupiah to a hawala dealer who gives him a unique code or password in return for his money. He then passes that code on to his mother who goes to her local store in Manama, gives them the code and gets the equivalent amount in Bahraini dinar, minus a small commission. The transfer has been made but no money has physically crossed any borders.

Both hawala dealers keep an informal account of the transactions and over time balance their books using anything from cash to property or even the exchange of services. The system is based on trust and honour rather than legally binding transactions, but any hawala dealer not honouring their end of the deal will likely be excommunicated from the network (not to mention disgraced in their region).

For the people using it, hawala offers several benefits. It’s accessible as there are dealers in shops all over the world, it’s quick as there’s no need to wait for any money to be physically transferred, it’s anonymous as no firm records of transactions are kept, and the commission rates tend to be far lower than banks and brokers charge.

Is hawala a safe way to transfer my money?

Simply put, no. Hawala is illegal for a variety of reasons but primarily because its unconventional, haphazard methods fall outside of regulations designed to keep global banking safe and secure. In particular, the anonymity it provides has made it an obvious choice for criminals, money launderers and as a way to fund dangerous activities like terrorism.

This has led many countries to ban or review their approach to hawala and try to enforce stricter record keeping of all financial transactions – although it has to be said, with limited success. India, for example has introduced the Foreign Exchange Management Act (FEMA) and Prevention of Money Laundering Act (PMLA) to try and stem the popularity of hawala within its borders.

Companies too are adapting to try and legitimise the traditional hawala system by bringing it into the 21st century through mobile banking apps and payment platforms. And then there are other options – companies like Clear Currency that match the speed, convenience and low costs of hawala but carry with them none of the risks associated with it because we’re regulated to be legal, safe and secure.

Thinking about making a transfer?

Before you do you should speak to us on 0207 151 4832 or hello@clearcurrency.co.uk. Clear Currency takes a different approach, bypassing typical fees to offer more competitive rates and less hassle, so you get your currency quickly and with the minimum of fuss.

We’ll advise you on the best type of transfer for your situation and give you a far better rate than the banks, who charge big margins on the exchange rate that can cost you dear. And as we’re regulated by the Financial Conduct Authority, you know your money is safeguarded through every step of your transaction – unlike with the hawala system.

Essentially then, we take the best parts of hawala and make it safe, traceable and accountable. Try us today.

The Clear Currency effect:

Keep it simple


Hawala is an ancient but illegal way of transferring money across borders without paying extortionate banking fees.

Hidden costs

It’s quick, cheap and anonymous, which sounds great but comes with hidden costs.

Minimise your risk

Clear Currency offers the same low costs, accessibility, simplicity and speed of hawala but without any of the associated risks or illegality.

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