Because Prime Minister Narendra Modi unleashed ‘a
surgical economic strike’ against black money by suddenly
declaring that Rs. 500 and Rs. 1,000 notes ceased to be
legal tender from 11 November 2016.
But what is 'hawala'?
A traditional system of transferring money – without
moving actual money - used in Arab countries and South Asia,
whereby the money is paid to an agent who then instructs an
associate in the relevant country or area to pay the final
Known also as ‘chitti’, the system by-passes the legal
routes like the banking system or official money
transferring companies to remit money.
In fact, "money transfers without money movement".
You pay the amount you want to send to a 'hawala' dealer at
the going rate, usually less than the bank rate, and get a
password or a simple piece of paper with an innocent
You give the password or hand the message to a person at
a specific address where you or your relative collects the
At both points, a large pile of cash is needed and this
cash is unaccounted or black money.
As payments usually happen without any foreign exchange
transactions, they can be made at other than official
This system helps the uneducated labour in the Middle
East and elsewhere.
Without going to the bank and filling up forms,
depositing the cash and then informing their usually
uneducated relatives to collect the cash from their local
bank, it delivers the money to them by simple identification
and a password.
The shady 'hawala' operators more than often have links
with smugglers, betting syndicates, drug dealers and
terrorists for using huge amounts of cash for their illegal
Thus what started as a legitimate IOU note in the Middle
Ages and in the heydays of the Silk Route to help merchants
not to carry cash lest they be robbed has become illegal.
"With thousands of expats using it every day, the amount
is in thousands of crores and is a perfect façade for other
"The real flesh however comes from transactions worth
thousands of crores (billions) made by industrialists and
politicians and is used by the 'hawala' handlers to fund
their illegal traders like drugs and arms, terrorist
networks and anti-national ‘revolutions’," explains Dr.
Subramaniam Swamy, a noted economist and a maverick
Thus, a global crackdown on hawala has hurt these dealers
since 9/11 in USA.
Now on another 9/11 in India, it is a knockout punch for
black money, forged currency and smuggling.