Hawala is an informal method of moving value between places through a network of brokers, and it is described in full in the main entry on the hawala transfer. A customer gives money to a broker in one location, and a partner broker pays out the equivalent to the recipient elsewhere. No funds need to cross the border for each transaction; the brokers settle what they owe one another later, through trade, cash, bank transfers or offsetting payments in the other direction.
The word comes from Arabic and carries the sense of transfer or assignment. It is used for the system as a whole, while a broker is a hawaladar. The practice is centuries old in South Asia and the Middle East, where the related term hundi is also used, and it remains common in remittance corridors where banks are scarce, slow or costly. Regulators classify it as an informal value transfer system.
Hawala is distinct from hawalah, the contract in Islamic law under which a debt is transferred from one debtor to another, although the two share a root. Because it leaves few formal records, hawala is treated as a higher risk for money laundering, and most countries require its operators to register or hold a licence.