"Hawala" consists of transferring money (usually across borders and
in order to avoid taxes or the need to bribe officials) without
physical or electronic transfer of funds. Money changers
("Hawaladar") receive cash in one country, no questions asked.
Correspondent hawaladars in another country dispense an identical
amount (minus minimal fees and commissions) to a recipient or, less
often, to a bank account. E-mail, or letter ("Hundi") carrying
couriers are used to convey the necessary information (the amount of
money, the date it has to be paid on) between Hawaladars. The sender
provides the recipient with code words (or numbers, for instance the
serial numbers of currency notes), a digital encrypted message, or
agreed signals (like handshakes), to be used to retrieve the money.
Big Hawaladars use a chain of middlemen in cities around the globe.
But most Hawaladars are small businesses. Their Hawala activity is a
sideline or moonlighting operation. "Chits" (verbal agreements)
substitute for certain written records. In bigger operations there
are human "memorizers" who serve as arbiters in case of dispute. The
Hawala system requires unbounded trust. Hawaladars are often members
of the same family, village, clan, or ethnic group. It is a system
older than the West. The ancient Chinese had their own "Hawala" -
"fei qian" (or "flying money").
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