What is Hawala business. Is it illegal ??

Question

I am residing in India at Kanpur. One of my friends has earned huge wealth. I do not know what he actually does. He is a Company Secretary by profession and stays in my city. Friends which are more close to him say that he is into HAWALA business. Most of the time he is in some foreign land such as Australia, London, Newyork, Switzerland and Dubai.

Answer 1

Hawala is transfer of funds, mainly currencies, through illegal channels and means - within the country or internationally. In India, indulging in hawala is a criminal offence and attracts severe penalty.
It is a very well knit activity flourishing world over but banned or illegal everywhere.

Regarding your CS friend, you should think and make yourself sure 10 times before making any such allegations, suspicion or alike even though prima facie he might have created enormous wealth for himself. Such utterances about anybody in a forum like this may also land you in deep trouble. If you are sure about his illegal activities, you may approach appropriate law enforcing agencies with solid evidences, for your own sake.

Answer 2

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Hawala is an illegal way of transferring money without physical transfer of cash. This is done through Hawala agents operating in both senders and recepients city/country. The hawala business mainly depends on trust and confidence between both agents and also the customer and the agent. These agents work for a commission. The transfer of money is very fast that almost within minutes the money gets transferred (symbolic delivery). The hawaladars or the hawala agents usually have some legal business, which they do side by side to hide their hawala business. This type of transfer is commonly used by politicians and businessmen.

Answer 3

Hawala is an ancient middle eastern system of transferring money that is based on a handshake; no paper trails are required, making it hard to trace. People are able to transfer money across the globe and usually avoid high transaction fees that are common with services such as western union.

Someone from India told me basically, how it works is, if somebody along the chain doesn't pay up, then somebody gets killed because everybody involved handling the money knows each other. So the system does work.

Interpol has an article on its site that describes how it works

Answer 4

Hawala is a illegal mode of cross country money transfer and is a big trade in India where you get the money in flash from overseas and often delivered at home or doorstep and is fully illegal and organised sector and is a crime in FERA and under different CrPc's of India.
This is a very risky and paying business but needs sound contacts overseas.

Answer 5

What Is Hawala

Answer 6

Hawala (also known as hundi) is an informal value transfer system used primarily in the Middle East, Africa and Asia.

In South Asia, it appears to have developed into a fully-fledged money market instrument, which was only gradually replaced by the instruments of the formal banking system in the first half of the 20th century. Today hawala is probably used mostly for migrant workers' remittances to their countries of origin.

In the most basic variant of the hawala system, money is transferred via a network of hawala brokers, or hawaladars. A customer approaches a hawala broker in one city and gives a sum of money to be transferred to a recipient in another, usually foreign, city. The hawala broker calls another hawala broker in the recipient's city, gives disposition instructions of the funds (usually minus a small commission), and promises to settle the debt at a later date.

The unique feature of the system is that no promissory instruments are exchanged between the hawala brokers; the transaction takes place entirely on the honor system. As the system does not depend on the legal enforceability of claims, it can operate even in the absence of a legal and juridical environment. No records are produced of individual transactions; only a running tally of the amount owed one broker by the other is kept. Settlements of debts between hawala brokers can take a variety of forms, and need not take the form of direct cash transactions.

In addition to commissions, hawala brokers often earn their profits through bypassing official exchange rates. Generally the funds enter the system in the source country's currency and leave the system in the recipient country's currency. As settlements often take place without any foreign exchange transactions, they can be made at (black) market rates rather than official rates.

Hawala is attractive to customers because it provides a fast, convenient and safe transfer of funds, usually with a far lower commission than that charged by banks. Its advantages are most pronounced when the receiving country applies distortive exchange rate regulations (as has been the case for many typical receiving countries such as Pakistan or Egypt) or when the banking system in the receiving country is less complex (e.g. due to differences in legal environment in places such as Afghanistan, Yemen, Somalia).

Furthermore, the transfers are informal and not effectively regulated by governments, which is a major advantage to customers with tax, currency control, immigration, or other legal concerns. For the same reasons, governments disfavor the system, and accusations have been made in recent years that terrorist funding often changes hands through hawala networks.

Answer 7

Hundi was legal instrument and it is widely used in remote India.

Hawala is a different story.

Answer 8

"hawala" : a long-established, informal system of money transfer from India and the Middle East, still in use by migrant workers. "racket" : a fraud or swindle; an illegal scheme for profit.

Answer 9

It's illegal

Answer 10

It is illegal in India.