The Dual Nature of Hawala: Navigating Legitimacy and Illegitimacy in Informal
(2025) CCRM20 20251Sociology
- Abstract
- Parallel to the intensified digitization of financial transactions, an ancient informal system continues to operate in the shadows, exerting a significant influence on global financial structures. Hawala, as this system is known, is recognized for its dual nature, allowing it to function as a legitimate financial system, while its informal structure, particularly its lack of governmental oversight, has facilitated its exploitation as an illicit financial tool. Existing research on Hawala tends to dichotomize the system into either its legitimate or illegitimate uses, overlooking the complex interaction and coexistence between these two practices. Transcending this dichotomy, this thesis explores the interplay of these conflicting... (More)
- Parallel to the intensified digitization of financial transactions, an ancient informal system continues to operate in the shadows, exerting a significant influence on global financial structures. Hawala, as this system is known, is recognized for its dual nature, allowing it to function as a legitimate financial system, while its informal structure, particularly its lack of governmental oversight, has facilitated its exploitation as an illicit financial tool. Existing research on Hawala tends to dichotomize the system into either its legitimate or illegitimate uses, overlooking the complex interaction and coexistence between these two practices. Transcending this dichotomy, this thesis explores the interplay of these conflicting functions, with a particular focus on their manifestation within the Swedish legal context. By synthesizing empirical insights from law enforcement agencies with practical realities from court cases involving Hawala, this thesis delves into how formal institutions define and respond to Hawala, as well as the insights these definitions offer into the broader economic, institutional, and cultural frameworks that shape the perception of informal financial systems. Adopting frameworks that assess how money is imbued with varying social meanings and how social order is maintained, the findings of this thesis indicate a tension when attempting to understand informal practices, like Hawala, through a formal logic. Ultimately, this derives from the fact that Hawala resists binary classifications of legitimacy and illegitimacy, and thus operates in a gray area. This entails more than mere regulatory challenges for law enforcement agencies; it also positions Hawala at risk of being misinterpreted or reduced to oversimplifications. (Less)
- Popular Abstract
- Hawala is one of the oldest and most widely used informal transfer systems in the world. While Hawala has proven to be particularly important for sending remittances and providing urgent humanitarian aid to regions that lack functioning banking systems, it also presents significant risks. Since Hawala functions outside state regulation, it lacks transparency and formal documentation regarding the movement of funds within the system - making it particularly vulnerable to criminal exploitation, not least money laundering and terrorism financing, which rely on disguising the origins or intent of the money.
This has led to two different perceptions of Hawala: as either a legitimate financial system or an illicit financial tool. This... (More) - Hawala is one of the oldest and most widely used informal transfer systems in the world. While Hawala has proven to be particularly important for sending remittances and providing urgent humanitarian aid to regions that lack functioning banking systems, it also presents significant risks. Since Hawala functions outside state regulation, it lacks transparency and formal documentation regarding the movement of funds within the system - making it particularly vulnerable to criminal exploitation, not least money laundering and terrorism financing, which rely on disguising the origins or intent of the money.
This has led to two different perceptions of Hawala: as either a legitimate financial system or an illicit financial tool. This distinction has influenced previous studies of Hawala, with most of them arguing for one of the two sides. This thesis moves beyond this distinction by exploring how Hawala, as a system operating between legality and illegality, is represented in the Swedish legal context. By drawing from interviews with experts from law enforcement agencies and court cases involving Hawala, this thesis focuses on understanding the legal perception of Hawala, and what such a perception can reveal about broader economic, institutional and cultural frameworks that shape how we view informal systems.
The legal perception of Hawala is crucial as it contributes to the understanding of how authorities classify and respond to financial systems that operate beyond the conventional institutions, but are still commonly used and relied upon. Hence, by critically examining the legal perception of Hawala, this thesis deepens the understanding of how such an informal system manages to engage in practices that both challenges and conforms to formal institutional norms and values, while also contributing to the empirical field in Sweden, where research on Hawala has largely relied on official reports. In doing so, it also becomes possible to grasp the regulatory challenges faced by Swedish law enforcement authorities and the root causes behind them, which is, to say the least, timely, considering that the government issued a legal council referral in 2024 aimed at strengthening the regulation of Hawala. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9199567
- author
- Gholmi, Jasmine LU
- supervisor
-
- Erik Hannerz LU
- organization
- course
- CCRM20 20251
- year
- 2025
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Hawala, informal financial system, legal interpretation, regulatory challenges, multiple monies, anomalies
- language
- English
- id
- 9199567
- date added to LUP
- 2025-06-18 17:20:42
- date last changed
- 2025-06-18 17:20:42
@misc{9199567,
abstract = {{Parallel to the intensified digitization of financial transactions, an ancient informal system continues to operate in the shadows, exerting a significant influence on global financial structures. Hawala, as this system is known, is recognized for its dual nature, allowing it to function as a legitimate financial system, while its informal structure, particularly its lack of governmental oversight, has facilitated its exploitation as an illicit financial tool. Existing research on Hawala tends to dichotomize the system into either its legitimate or illegitimate uses, overlooking the complex interaction and coexistence between these two practices. Transcending this dichotomy, this thesis explores the interplay of these conflicting functions, with a particular focus on their manifestation within the Swedish legal context. By synthesizing empirical insights from law enforcement agencies with practical realities from court cases involving Hawala, this thesis delves into how formal institutions define and respond to Hawala, as well as the insights these definitions offer into the broader economic, institutional, and cultural frameworks that shape the perception of informal financial systems. Adopting frameworks that assess how money is imbued with varying social meanings and how social order is maintained, the findings of this thesis indicate a tension when attempting to understand informal practices, like Hawala, through a formal logic. Ultimately, this derives from the fact that Hawala resists binary classifications of legitimacy and illegitimacy, and thus operates in a gray area. This entails more than mere regulatory challenges for law enforcement agencies; it also positions Hawala at risk of being misinterpreted or reduced to oversimplifications.}},
author = {{Gholmi, Jasmine}},
language = {{eng}},
note = {{Student Paper}},
title = {{The Dual Nature of Hawala: Navigating Legitimacy and Illegitimacy in Informal}},
year = {{2025}},
}