What is hawala money transfer

| by Max Soni

What is hawala money transfer?

Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience in federal criminal defense. We’ve represented clients in cases that captivated national attention – Anna Delvey’s Netflix series, the Ghislaine Maxwell juror misconduct case, allegations involving Alec Baldwin. If you’re reading this, you’re either curious about hawala systems or you’re facing federal charges connected to unlicensed money transmitting. Either way, you need to understand what federal prosecutors see when they look at hawala – and why they’re prosecuting these cases aggressively in 2025.

Hawala is an informal value transfer system that moves money across borders without actually moving money. No wire transfers, no banks, no paper trail. You hand cash to a broker in New York, someone in Karachi receives cash an hour later. The system runs on trust, ledgers, and a network of hawaladars who settle accounts later through trade, invoices, or reverse transfers. It’s centuries old, it’s embedded in Middle Eastern and South Asian communities, and in the United States – it’s illegal if you don’t register with FinCEN and comply with federal money laundering laws.

Federal prosecutors don’t care that hawala has legitimate cultural roots. They see an unregulated cash pipeline that drug cartels, terrorist networks, and tax evaders use to move money invisible to law enforcement. After 9/11, enforcement went from occasional to relentless, relentless.

How hawala actually works

You walk into a small shop – maybe a jewelry store, maybe a grocery – and tell the owner you need to send $10,000 to Pakistan. You hand over cash. The owner calls his counterpart in Karachi, gives him a code, and your recipient picks up the equivalent in rupees within hours. No banks involved, no SWIFT codes, no CTR filings when amounts exceed $10,000.

The two brokers never actually transfer that $10,000 between themselves. They keep ledgers. When the balances tilt too far one direction, they settle through legitimate trade – undervaluing invoices, overvaluing imports, or sending a reverse hawala transfer. Some networks settle every few months, some wait years.

It’s fast. It’s cheap – fees run 1-2% compared to 5-10% at Western Union. And for communities that distrust banks or come from countries where banks are unreliable, hawala feels safer than a wire transfer.

That’s exactly why federal prosecutors target it. The same features that make it attractive for remittances make it perfect for laundering drug proceeds, moving money for the Sinaloa Cartel, or financing terrorism. In April 2025, two men were sentenced to three years in federal prison for running a hawala network that moved over $65 million between the U.S. and the Middle East. Mohanad Al-Zubaidi and Shaker Saleh Mohammed Hauter operated from 2018 through 2022, facilitating hundreds of transfers ranging from thousands to hundreds of thousands of dollars. They didn’t register as money transmitters. They didn’t file Suspicious Activity Reports. They got caught, convicted under 18 U.S.C. § 1960, and they’re doing time.

The federal criminal charges you’re facing

Operating an unlicensed money transmitting business – that’s the core charge. 18 U.S.C. § 1960. Maximum five years in federal prison. The statute makes it illegal to knowingly conduct, control, manage, supervise, direct, or own all or part of a money transmitting business without proper state licensing and federal registration.

Hawala operators get hit with this charge because they can’t comply with registration requirements under 31 U.S.C. § 5330 or Bank Secrecy Act obligations. You’re supposed to register with FinCEN, implement anti-money laundering programs, file Currency Transaction Reports for cash deals over $10,000, submit Suspicious Activity Reports when transactions look dirty. Hawala networks – by design – do none of this.

The five-year maximum is just the starting point. If prosecutors connect your hawala operation to drug trafficking, you’re looking at the same guideline calculations as money laundering, and money laundering offenses averaged 62 months in fiscal year 2024 according to U.S. Sentencing Commission data. For larger conspiracies involving terrorism financing or cartel proceeds, defendants face guideline minimums exceeding 100 months – that’s eight-plus years before any cooperation credit.

In the Central District of California, a Monrovia man was sentenced to nearly six years in prison for operating a hawala scheme that moved money for the Sinaloa Cartel and other drug trafficking organizations. That case shows how federal prosecutors stack charges – unlicensed money transmitting, money laundering conspiracy, structuring violations. Each count compounds your exposure.

And then there’s forfeiture. In the $65 million Middle East case, Al-Zubaidi was ordered to forfeit $430,000 and Hauter forfeited $385,000 on top of their prison terms. Federal authorities seize the cash, the ledgers, any property traceable to the operation. You lose everything tied to the business even if you beat some charges at trial.

Why FinCEN and DOJ are cracking down in 2025

Post-9/11 enforcement never let up. FinCEN issued advisories throughout the 2000s and 2010s emphasizing that informal value transfer systems – they call them IVTS – are used to fund terrorist attacks, including against the United States. FinCEN’s reports on IVTS make clear that while hawala isn’t inherently criminal, it’s a preferred mechanism for bad actors because it leaves no electronic trail.

Federal prosecutors in 2025 are pursuing these cases with resources they didn’t have 20 years ago. Financial intelligence units track patterns – repetitive cash deposits just under $10,000, frequent money orders, wire transfers to high-risk jurisdictions followed by hawala pickups. When a hawala network surfaces, federal agents build cases over years. They surveil the storefronts, record transactions, flip cooperating witnesses, analyze ledgers seized in raids.

The Chinese money laundering cases demonstrate how sophisticated these investigations get. In July 2025, the final three defendants in a prolific Chinese money laundering scheme pled guilty to laundering tens of millions in drug proceeds. These cases involve undercover operations, controlled deliveries, financial analysis stretching across multiple countries.

Hawaladars think they’re invisible because there’s no bank involved. You’re not invisible. Confidential informants, intercepted communications, ledgers recovered in search warrants – that’s how these cases get made.

What happens if you’re charged

First – federal prosecutors will freeze your assets. Seizure warrants get executed the same day as arrest warrants. Your bank accounts, your store, your house if they can tie it to proceeds. You’re fighting the case with whatever you can scrape together for a lawyer, and forfeiture litigation runs parallel to the criminal case.

Second – expect pressure to cooperate. In the $65 million case, three men were originally charged, only two were sentenced. Federal prosecutors offer 5K1.1 substantial assistance departures if you give up your counterparts overseas, identify customers, testify about the network. Cooperation can cut your sentence in half or more, but it comes with consequences – you’re handing the government everyone you worked with, and if your testimony is shaky, you lose the deal and face sentencing enhancements for obstruction.

Third – guideline calculations in money laundering cases get complicated fast. The base offense level depends on the amount of money involved. Over $65 million puts you at a base offense level in the high 20s before any adjustments. Add points for leadership role if you managed the network, add points if the funds were connected to drug trafficking or terrorism, subtract points for acceptance of responsibility if you plead guilty early. A defendant with no criminal history facing an adjusted offense level of 25 is looking at 57-71 months under the guidelines. Judges can vary downward – or upward – but the guidelines anchor the sentence.

Fourth – supervised release follows prison. In the Middle East case, both defendants got two years of supervised release after their three-year prison terms. That means reporting to a probation officer, restrictions on travel, prohibitions on engaging in money transmission, potential random searches. Violate supervised release conditions, you’re back in custody.

Todd Spodek has handled federal cases where defendants thought they were just helping their community send money home, and they’re staring at 10-year guideline ranges because federal prosecutors connected transfers to fentanyl proceeds. Intent matters – if you knew or should have known the money was dirty, you’re exposed to money laundering charges on top of unlicensed money transmitting.

Why you need a federal criminal defense lawyer who understands financial crimes

Hawala cases are document-intensive. Ledgers in multiple languages, financial analysis spanning years, expert testimony about IVTS mechanics and cultural context. Prosecutors bring forensic accountants. You need a defense team that can challenge their calculations, dispute the alleged transaction amounts, cross-examine cooperating witnesses who might be lying to save themselves.

At Spodek Law Group – we’ve represented clients in complex financial crime cases where the government’s case looked unbeatable. We know how to attack the money laundering conspiracy charges, how to negotiate departures based on mitigating role, how to argue for sentences below the guideline range. Our managing partner, Todd Spodek, is a second-generation criminal defense attorney with many, many years of experience handling federal cases that other firms won’t touch.

If you’re under investigation for operating a hawala network or you’ve already been charged under 18 U.S.C. § 1960, the decisions you make in the next few weeks determine whether you’re looking at probation or a decade in federal prison. Don’t talk to federal agents without a lawyer. Don’t try to destroy records – obstruction of justice adds years to your sentence. Don’t assume that because you were helping your community, prosecutors will go easy. They won’t.

We’re available 24/7 to discuss your case. We handle federal criminal defense coast to coast, and we’ve built our reputation on winning cases others called unwinnable. If you’re reading this because you’re terrified about a grand jury subpoena or a search warrant executed at your business, call us. We can help.