Interpol describes it as "money transfers without money movement". It is an ancient system used to move money around financial and legal barriers. It is faster, cheaper and more reliable than banking transactions, without the hassles of bureaucracy and legal restrictions. It is closely connected with the Dubai gold trade. If a gang smuggles gold into India from Dubai, the seller in Dubai would not like payment in Indian Rupees, but would prefer the easily convertible Dhirams. So the Indians in Dubai who want to send money home pay to the hawaldar in Dubai who keeps the cash and arranges to get his agent in India pay the money in India in Rupees. This way every one is happy and no money really moves. Criminal networks and terrorist gangs are the main patrons of the hawala system. As there is no paper trail, the secrecy is perfect. It was initially believed that the September 11 attack was funded through Hawala, but of course the 9/11 Commission Report has since confirmed that the bulk of the funds used to finance the assault on the twin towers were not sent through the hawala system, but rather by inter-bank wire transfer. Part of the funding must have been through hawala. An ancient system that criminals have exploited, hawala is now a bad word.