Hawala, Arabic for transfer, is the name of an informal transfer system that emerged along the Silk Road in the eighth century.
The system is still widely used around the world and is based on global networks of intermediaries, hawaladars, vouching for assets and values. It’s a way to transfer money without moving it.
The most common is for an intermediary on behalf of a sender to contact another intermediary in the recipient’s vicinity, vouch for the existence of an amount and ask for it to be paid out.
The debt is settled at a later date, and the system is thus entirely based on trust between the parties involved.
The vast majority of transactions are legitimate and hawala is a lifeline for people in, for example, war-torn areas or communities affected by natural disasters. However, the system has also been used by terrorist organizations and criminals who want to hide income from criminal activities.
Source: Total Defense Research Institute