Hawala and similar systems are widely used for legitimate remittances but are also abused for laundering and terrorist financing because records are minimal and settlement may happen through trade or offsetting balances. In many countries hawala operators must be registered or licensed.
Example
A customer pays cash to a broker in one country; a partner broker in another country pays out the same value to the recipient the same day.
Where it appears in the exams
This topic is relevant for CAMS, CFCS.
Related terms
- Trade-based money laundering (TBML): Trade-based money laundering is the use of international trade transactions to disguise criminal proceeds and move value, for example by falsifying the price, quantity or quality of goods on invoices.
- Layering: Layering is the second stage of money laundering: moving funds through many transactions, accounts, companies or countries to hide where they came from.
Source: FATF: The role of hawala and other similar service providers in money laundering and terrorist financing (2013). Independent explanation for study purposes, not legal advice.