Hawala

noun (uncountable); attributive adjective

/həˈwɑː.lə/

An informal value-transfer system operating outside formal banking channels, in which money is transferred through a network of brokers (hawaladars) using trust, codes, or promissory notes rather than physical movement of cash. In India, hawala transactions are governed by the Foreign Exchange Management Act (FEMA), 1999 and the Prevention of Money Laundering Act (PMLA), 2002; the Enforcement Directorate (ED) is the primary enforcement agency. Hawala networks are frequently implicated in funding terrorism and organised crime.

✍️ Usage in a UPSC answer

The Enforcement Directorate's 2024 chargesheet alleged that hawala channels routed over ₹200 crore to separatist outfits in Jammu and Kashmir, bypassing SWIFT-monitored banking and exploiting cross-border trust networks that span Dubai, Karachi, and Srinagar.

Synonyms

informal remittanceunderground bankingparallel financevalue-transfer networkchit-based transfer

Antonyms

formal bankingregulated remittancetransparent transferSWIFT transaction

🌱 Word Family

hawaladar (noun), hawala (attributive adjective as in 'hawala network', 'hawala racket')

🔡 Root

Arabic ḥawāla (حَوَالَة) = transfer, remittance; from ḥawwala = to change, to transform, to transfer

📜 Etymology

Directly from Arabic ḥawāla, a term deeply embedded in medieval Islamic trade finance denoting a bill of exchange or transfer of debt. The practice reached South and Southeast Asia through Arab and Mughal-era merchants; the word entered Indian legal and journalistic usage as the informal transfer system proliferated. In modern international finance, it is also known as the 'underground banking' or fei-ch'ien (flying money) system in Chinese contexts.

🧠 Memory Hook

HAWALA sounds like 'hawa' (air/wind in Hindi/Urdu) + 'la' (take). Money travels like wind — invisibly, without formal channels. No paper trail, no bank receipt, just a whisper of trust between brokers.

🛡️ Internal Security 📖 Seen in: Internal Security — Threats, Cyber Sec... 📋 Also in Key Terms

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