Definition

Hawala is an informal money transfer mechanism that predates modern banking. The system operates through a network of brokers (hawaladars) who facilitate the movement of funds across borders without physical currency actually crossing those borders. A sender gives money to a hawaladar in one country, who contacts a counterpart in the recipient’s country to release an equivalent amount. Settlement between hawaladars occurs later through trade, reciprocal transfers, or cash. The system relies on trust, family ties, and honour rather than formal contracts or legal enforcement.

UAE Context

The UAE has historically been one of the world’s largest hawala corridors, driven by its massive expatriate workforce remitting wages to South Asia, East Africa, and Southeast Asia. The Central Bank of the UAE requires all hawala providers to register and obtain a licence under the Registered Hawala Providers scheme, established by Federal Law No. 24 of 2021 on Anti-Money Laundering and Combating the Financing of Terrorism. Licensed providers must maintain transaction records, report suspicious activity, and comply with know-your-customer (KYC) requirements. Unlicensed hawala operations carry severe criminal penalties.

Key Data

The UAE processes an estimated USD 30 billion in annual remittances through both formal and informal channels. The country ranks among the top five global remittance-sending nations. Regulatory crackdowns have significantly reduced unlicensed hawala activity, with hundreds of enforcement actions since 2020 as part of the UAE’s FATF compliance programme.

Vision 2031 Significance

Bringing hawala networks under formal regulatory oversight supports the UAE’s objective of maintaining its position as a global financial centre while meeting international anti-money laundering standards. The transition from unregistered hawala to licensed exchange houses and digital remittance platforms reflects the federation’s broader financial modernisation agenda.

Related Terms

• FATF Compliance — International standards the UAE implements to regulate informal value transfers.
• Anti-Money Laundering (AML) — The regulatory framework governing all value transfer systems.
• Central Bank of the UAE (CBUAE) — The authority licensing and supervising hawala providers.
• Remittances — Cross-border money transfers that drive demand for hawala services.