This brown homie at work was filling me in on the financial underworld of India specifically mentioning Hawala transactions. Interesting stuff. I looked it up on Wiki for more info, however, do any of the fine financiers of AF have insight about this?
This is an informal and underworld system of transfer of cash, especially among Muslims - mainly concentrated in the Horn of Africa, Middle East and India.
This is how it works. You are a taxi driver of Somali Origin in Sydney. You want to send money to Mogadishu, or buy a house in neighbouring Kenya. Your point of contact is the nearest hawala agent based in Sydney. They will collect the cash you want to remit to Mogadishu and their hawala agent in Kenya will pay out to the recipient. The two agents agree on how they will exchange the money.
This is where it becomes dodgy - you have Somali pirates in the Horn of Africa - with millions of dollars. That cash is used as part of the Hawala trade, their contacts in New York or Sydney will settle transactions by, say, buying a house for them or their agents and simultaneously they also invest on their behalf in Africa. Barter trade without any trail.
We have a holiday home in the Kenyan coast - and I was shocked that apartments in some parts of Nairobi cost about $300,000. For a third world country that is way too expensive. The pirates and the hawala system have distorted the financial system.
The Indian version of Hawala may be a bit legit.
^ Mad respect.
Also, the communication is in coded language, such that unless you have an informant no cyber agent would have a clue what is going on.
How do you even regulate such a system?
I use this in India all the time. There is no regulation. It’s impossible to really prosecute because you can’t really prove that the transaction happened as it works 100 percent on trust. There usually isnt even a record book. At most just a running tally of who owes the other how much.
^ Can you share what you use it for? Is there an alternative?
^ Alternatives are Western Union, Moneygram or Mobile Transfer. But these live a trail.
So lets say need to make one million dollars appear in Dubai. I could go to the bank in India and spend the rest of my life dealing with paperwork.
Or…
I go to my neighborhood muslim Hawalla man. I hand him a million dollars worth of ruppees. He calls up his buddy in Dubai. A million dollars worth of Dirhams has just appeared in Dubai and whoever I tell to collect it can just collect it INSTANTLY. The spread they charge is usually very small and much better than banks.
You won’t see this in the CFA curriculum, but this is how Indian politicians, Terrorists, and wealthy Millionaires in South Asia move their money around.
The actuall Hawalla agents usually have some sort of Export/Import business which helps facilitate this. However, at most they just keep a number in the heads and wait for it to get paid back to them through a similar transaction but in the other direction. But next time your in a shitty neighborhood in London and you see all those Indian/Pakistani travel agents who offer things like “Sweet Rupee Deals” that’s your signal that you’ve found a Hawalla.
This also works on a domestic level. Sometimes you need to make a briefcase full of rupees appear in Delhi when you are in Mumbai. Thanks Hawalla.
I used it just last week to convert 300k rupees into dollars. To do this at my bank I would need to notify them a day in advance and have my accountant fill out a shitload of paperwork. The exchange rate would be extortionate. Whereas at my neighborhood Hawalla there is no paperwork, no quesitons, and just Basis Points of payment. Thanks Hawalla.
Indians won’t talk about it publically. Honestly, it’s a really taboo subject in India. You won’t get anyone to admit that they use such services publically. However, anybody with any means does.
^ Bravo!