What is Hawala? The method Somali's used to transfer funds outside the banking system.

Thread: https://x.com/i/status/2011904692549476628

The suitcases full of cash moving through Minneapolis St. Paul Airport fit the profile of a Hawala money broker settling balances in cash. What is Hawala?

Hawala is a network of money brokers that function like an unregulated Western Union of the Middle East and North Africa. Brokers keep large amounts of cash and communicate outside of the regulated banking system. When you wish to send money to someone in, say, Somalia, where there is little to no presence of banking institutions, a Hawaladar broker may be your only option.

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>>24130223 (me)

Say a Hawaladar in Minneapolis has a client who requests to send $1,000 USD to Puntland, Somalia. The Hawaladar accept the cash and takes a cut (say, 3%) and contacts a Hawaladar in Puntland. They agree on an authorization method (a challenge-response phrase , authentication token, or ID pair) and provide that method to the sender. The sender provides the authorization method to the recipient, and the recipient picks up their cash from the Hawaladar in Puntland, less the service fee that both Hawaladars collect.

>>24130232 me)

However, in the case of Minneapolis and Puntland, the cash balances that Hawaldars hold require constant and rapid resettlement, because the transfers are only flowing one direction (no one in Somalia is sending $1k to their cousin in Minneapolis). Therefor, cash is constantly being sent via courier to Somalia.