#QuickBiteCompliance Day 137
Hawalada: The Shadow Brokers of Underground Finance
Imagine you need to send money to a relative in another country, but instead of using a bank, you go to a local Hawalada—a hawala broker. You give them cash, and they contact another Hawalada in the destination country, who then hands the same amount to your relative. No bank records, no digital footprint—just trust and a phone call.
While many people use Hawaladas for legitimate reasons like remittances, criminals have also found ways to exploit them. Here’s how:
🔸 Money Laundering: A drug dealer in one country gives dirty cash to a local Hawalada. That broker contacts a partner abroad who pays out “clean” money, disguising the criminal origin.
🔸 Terrorism Financing: Illicit groups use Hawaladas to move funds across borders without banks detecting them. Since transactions rely on personal networks, it’s nearly impossible to trace.
🔸 Sanctions Evasion: Entities under sanctions use Hawaladas to bypass financial restrictions and keep trading. Since there’s no involvement of regulated financial institutions, authorities struggle to track these transactions.
So, how do we regulate Hawaladas without harming those who rely on them for legitimate transfers?
✅ Inclusive Regtech (Regulatory Technology): By introducing risk-based monitoring tools, we can detect misuse without disrupting legitimate users.
✅ Open Source AML (Anti-Money Laundering) Tools: Data-sharing platforms can help identify suspicious transaction patterns linked to criminal networks.
✅ Financial Inclusion & Digital Solutions: Providing safe, affordable alternatives can reduce reliance on informal brokers.
While Hawaladas play a vital role in many economies, their unchecked use creates loopholes for financial crime. A balanced approach—respecting tradition while enhancing oversight—can help secure financial systems without excluding vulnerable communities.
Learn more about AML risks here: https://www.acams.org/en/resources/aml-glossary-of-terms
#AML #FinancialCrime #Hawalada #MoneyLaundering #TerrorismFinancing #SanctionsEvasion #Regtech #InclusiveRegtech #OpenSourceAML #100HariNulis
