What Is The Difference Between Online Money and Hawala System?

“Hawala” –this is one term that has been doing rounds across various leading headlines quite frequently these days. The particular money transfer process is closely related to the famous names in India like Naresh Jain, Hasan Ali Kha, Madhu Koda, and several more “Hawala Kings”. The individuals usually have a particular query in mind about the meaning of Hawala and why this is illegal.

What Is The Difference Between Online Money and Hawala System?

What is the Hawala System?

The term “Hawala” is translated into “trust”. The Hawala system is considered to be a parallel remittance infrastructure or an alternative scheme in which all the transactions and working are carried out of the legality of the banks and various other financial systems. The Hawala system owes its background to the olden times with the prevalent money transfer services that had existed back then. The particular money transfer form had initiated in South Asia. It is currently being used across the world.This system has captured its deep roots in the Indian peninsula in the current times. It had started in India much prior to the introduction of the western banking system.

The Hawala system is also referred to as the “Underground Banking” sometimes. This is because of the associated under-rated transactions &activities. Though this system has been used throughout the world for the remittance of the funds, still it is not regardedas any legal system. The overall working of this system is on the basis of the functioning of various middle men known as the hawala dealers or the “hawaladars”. The main reason for the increasing popularity of this system even it being illegal is due to the indivisible element of reliability and immense use offamilyor regional affiliations.

Working of the Hawala System

The underlying principle of the working of this system depends on the money transfer without any movement of the money actually. In any typical hawala system of transaction, there is absence of any physical movement of the desired cash. The hawala system operates with the aid of a completely dedicated network of particular operators referred to as the hawala dealersor the “hawaladars”. Any individual who desires to make the transfer of money will have to contact thespecific hawala dealer at a required source location. The dealer who is at the other end will then collect the given amount of money from the individual who wishes to make the transfer of money. The dealer would then call upon any of the counterpart or other operators present at the givencountryor destination for the desired transfer. The dealer at the respective end of the destination would hand over the given cash to the desired recipient once he has taken the portion of his commission.

Difference Between Hawala and Online Money Transfer System

The major difference between the Hawala and the online money transfer services is the difference in their ideology or principle of working. The Hawala system is more of a traditional method of transferring money amongst different individuals. However, the online mode of transferring money involves the use of the latest technology and innovation while making the desired transfer. Moreover, there is a certain amount of risk involved with the Hawala system as it is considered to be illegal in certain parts of the world. However, with respect to the online modes of transferring the money with the use of leading money transfer services like the Western Union, Instarem, and so more; there is the complete assurance of the safety and reliability of the money transfer. As such, people nowadays prefer to use the online methods of making the transfer in comparison to the traditional modes. The online money transfer services tend to be instant, reliable, and highly secure than that of the Hawala system.