Hawala is an informal value transfer system operating through a network of brokers (hawaladars) who settle transactions by offsetting balances without physical movement of funds. Originating in the Arab and South Asian world, it enables fast, low-cost transfers outside the regulated financial system. In financial due diligence and AML compliance, the detection of hawala flows is a major red flag: these transfers are virtually untraceable, circumvent KYC/AML obligations and are used to conceal illicit fund origins. In both France and Switzerland, the use of hawala constitutes a criminal offence under anti-money laundering legislation.

‍

Example: during due diligence on an import-export company active in North Africa, the analyst identifies periodic transfers to entities domiciled in non-cooperative jurisdictions without documented commercial counterparts. These flows exhibit the characteristics of a hawala network — leading to immediate suspension of the mandate and filing of a suspicious activity report with the relevant FIU.

‍

Hectelion's KYC and AML procedures integrate hawala pattern detection in every mandate involving cash flows to or from higher-risk jurisdictions.