Disclaimer: Previous Taxpayer does not condone, endorse, or engage in any illegal behavior. This information is provided as research only. Aside from being stupid as hell, you will literally ruin your life by getting caught for any financial crime.
Hawala is a common form of money laundering where you move money across borders without your money ever leaving the home country.
Here’s how it works:
- You’re a drug dealer in London and in possession of £100,000 cash.
- You want to go to Berlin and take the money with you, but you can’t travel with it, and you can’t report it or deposit it into a bank account.
- You bring the money to a Hawala agent in London, let’s call him Rufus. Rufus is part of a Hawala ring and has a remote agent in Germany.
- You get on a plane and fly to Berlin Tegel Airport. In Berlin, you meet with Rufus’ German agent, Albert, who is part of the same Hawala ring.
- Albert gives you €100,000 cash in Berlin, but takes a small percentage of the cash as a commission.
- Back in London, the £100,000 you gave to Rufus is now part of the Hawala rings holdings. The original cash remains in London with Rufus.
Rufus and Albert act as international, black-market bankers and take a commission on making your funds accessible to you in different countries.
But are there legitimate uses for Hawala? Some say yes. The Economist recently wrote that Hawala is often used by immigrants to send money from developed nations back to their home country where formal banking and money-transfer services are either too expensive or non-existent. In most cases, the money also becomes available more quickly for the recipient in the new location.
The US Department of Treasury notes that Hawala is used for a diverse array of crime including
- Narcotics trafficking
- Alien smuggling
- Inside trading
- Customs and Tax Violations
- Illegal gambling
- Money laundering
You can read the US Department of Treasury’s full report on Hawala by clicking here.