AML

Hawala: Red Flags for Detecting the World’s Oldest Form of Money Laundering

Today’s installment deals with a time-tested way to move money around the world secretly, known in South Asia as Hawala or Hundi, and in China by the term “flying money” among many.

 The Hawala system is one of money transfers based entirely on trusted non-bank networks that may use the banking system as a portion of the transfer process. It may consist of entirely legal or illegal transactions. It may work like this:

 Mr. A in Asia wants to send $10,000 to Mr B in Baltimore. Mr. A gives the local equivalent of $10,000 in currency, gold, diamonds or something else to a member of a Hawala network in his city in Asia. That person contacts another member of the network in Baltimore, who makes an entry that he needs to deliver $10,000 (minus small fees for the network members on both ends) to Mr. B. Mr. B gets his money, and the only documentation is a book entry within the network, and perhaps an email or text message.