Question

Hawala transactions relate to payments: 

(a) received in rupees against overseas currencies and vice versa without going through the official channels 

(b) received for sale/transfer of shares without going through the established stock exchanges 

(c) received as commission for services rendered to overseas investors/buyers/sellers in assisting them to get over the red tape and/or in getting preferential treatment 

(d) made to political parties or to individuals for meeting election expenses

Answer 1

(a) Hawala is an illegal method of remittance across countries. There are money brokers who are the middle men who undertake hawala transfer. This method of remittance does not involve physical movement of cash. It is also known as Hundi. The word Hawala means trust. The Hawala system works as it is based on mutual trust between the hawala agents. It works outside the banking system and legal financial systems. The remittance happen based on communication between the hawala agents. It is an alternate to traditional remittance system.