The hawala method of transfer of funds is, in short, an informal method of debt settlement, built upon a mutual trust of each party to the transaction. Transfers of hawala funds are facilitated through an informal value transfer system by active hawaladar brokers, who maintain relationships of absolute trust between each other, so they are in a position to broker and execute swaps of value between themselves with the minimum amount of administrative records and avoiding local bureaucratic controls.
In Hussain and Ali [2005], Lord Justice Hooper described the detail of the process as follows (at paragraph 25 of the judgement): “Hawala banking is an arrangement by which individuals (or intermediaries who have collected money from individuals) deposit money, usually in the form of modest amounts of cash, with a hawaladar in, for example, the UK to be remitted to beneficiaries abroad, commonly in the country from which the remitters’ families originate, for example Pakistan.
