How does hawala work

Hawala banking and criminal law

The arrest warrant from the Lübeck Regional Court revoked

It works like PayPal, but is centuries old: the Muslim payment system hawala banking. This is understood to mean the confidential provision of financial services outside the regulated and licensed market of banking and financial transfer service providers.

Originally intended - and still used today - the hawala banking guarantees a secure possibility of money transfers with the involvement of trustworthy middlemen, even in regions without a stable banking infrastructure (cf. Kudlich / Oglakcioglu, Commercial Criminal Law, 3rd ed. 2020, marginal number 201e).

The Scientific Service of the Bundestag also recognizes that this system is often used for legitimate purposes such as remittances from home. There is no other option for transferring money to relatives who have stayed there, especially for regime-critical civil war refugees from Syria.

With hawala banking, the money to be transferred is paid into a hawala dealer (hawala radar) for a fee (around 0.5 - 5%). These are often travel agencies or small shops. The payer receives a password, which he gives to the recipient at the payout location. At the destination, the recipient receives the money from another Hawaladar against giving the agreed password.

So far so good. However, hawala banking can also offer terrorist or criminal organizations an opportunity to transfer funds with almost no traceability. The operation of financial transfer transactions is also subject to legal permission. For this reason there are repeated efforts by the state to stop hawala banking. Most recently in November 2019 there was a nationwide deployment of almost 1,000 police officers who searched numerous shops, restaurants and apartments.

According to Section 63 (1) No. 6 ZAG, anyone who provides payment services without permission (see Section 10 (1) sentence 1 ZAG) or without registration (see Section 34 (1) sentence 1 ZAG) is liable to prosecution. A criminal liability can also result from further provisions of the Criminal Code. The criminal offenses of money laundering and tax evasion come into consideration. In individual cases, criminal liability for financing terrorism in accordance with Section 89c of the Criminal Code may be considered.

These criminal offenses have very different requirements, so that it cannot be generally stated that and according to which participation in hawala banking is punishable.

Attorney Dr. For several weeks, Buchholz has been defending a defendant in a Lübeck criminal case in connection with hawala banking. After he had eaten in custody for over seven months, it has now been achieved that the arrest warrant is overturned and the accused is now free again for the time being. The main hearing is expected to begin in June 2020.