This paper examines the informal hawala system an ift system found predominantly in the middle east and south asia the paper examines the historical and socioeconomic context within which the hawala has evolved the operational features that make it susceptible to potential financial abuse the fiscal and monetary implications for hawala remitting and hawala recipient countries and current regulatory and supervisory responses. Informal funds transfer systems an analysis of the informal hawala system a joint imf world bank paper mohammed el qorchi samuel munzele maimbo and john f wilson c2003 international monetary fund august 18 2003 order information. This paper examines the informal hawala system an ift system found predominantly in the middle east and south asia the paper examines the historical and socioeconomic context within which the. Informal hawala systems have typically thrived in jurisdictions where the formal banking sector is either absent or weak or where significant distortions exist in payment systems as well as foreign exchange and other financial markets generally except for cases where the purpose of using the informal sector is of an illegal or criminal nature the growth of informal funds transfer systems seems to be negatively correlated with the level of development and liberalization of the formal . This paper examines the informal hawala system an ift system found predominantly in the middle east and south asia the paper examines the historical and socioeconomic context within which the hawala has evolved the operational features that make it susceptible to potential financial abuse the fiscal and monetary implications for hawala remitting and hawala recipient countries and current regulatory and supervisory responses