What is Hawala?

Correct option is D

The correct answer is (d) Illegal transactions of foreign exchange.
Hawala (also known as hundi) is an informal, underground value transfer system that allows money to be moved across borders without the physical movement of currency or the use of traditional banking channels. It is a "parallel" banking system based on a network of brokers called Hawaladars.
In many countries, including India, Hawala is illegal because it circumvents the Foreign Exchange Management Act (FEMA) and is frequently used for money laundering, avoiding customs duties, and financing illicit activities.
Information Booster
· The Process: It relies on a "trust" system. If a remitter in Country A wants to send money to a recipient in Country B, they give the cash to a local Hawaladar. That broker contacts a counterpart in Country B, who pays out the equivalent amount in local currency to the recipient.
· Settlement: The brokers eventually settle their balances with each other through various means, such as over-invoicing/under-invoicing in international trade, or smuggling.
· Cost and Speed: It is often used because it is faster than banks, charges lower commissions, and requires no formal identification, providing total anonymity.
· Legal Standpoint: Because these transactions are not recorded in official national accounts, they deprive the government of foreign exchange and tax revenue.
Additional Knowledge
· (a) Tax evasion is a frequent byproduct of Hawala, but the term specifically refers to the non-payment of taxes due to the state.
· (b) Illegal trading in stock exchanges is generally referred to as "Insider Trading" or "Dabba Trading."
· (c) Bank robbery is a criminal act of theft involving physical force or threat