Havala or Hawala (also, Making Up Price)

What is Hawala or Havala?

Hawala or Havala literally translates into “made up price”. It’s the rate fixed by a stock exchange in order to work out all liabilities between members (read: stock brokers) at the end of a SETTLEMENT PERIOD. Alternatively, it can also be defined as a substitute remittance channel formed outside the conventional banking system.
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Hawala is a ploy used to transfer money without any actual movement of the net amount quoted. According to Interpol (International Police), Hawala or Havala is the “money transfer without money movement”.

In most cases, transactions between havala brokers takes place without any sort of promissory notes (this is due to the fact that the system is usually heavily based on trust).

The genesis of this complicated system can be traced back to South Asia during the ancient times. However, today, it has spread all over the world – more so in Islamic countries where hawala is considered to be an alternative method of transferring funds.

Edited and Updated 15th February 2014

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