How the system works

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A man in a grey business suit walks into a textile shop in the heart of Abu Dhabi and greets the owner. Next to him is a phone and a fax machine and hundreds of numbers are scribbled on the wall over his head. Stacked around the walls of the shop are large spools of silk and cotton but the visitor is not here to buy fabric. Instead, he opens his wallet and pulls out three crisp Dh500 (US$136) notes and places them on the glass counter.

Next, he gives the shopkeeper the name of a man, a city in Pakistan and two telephone numbers. The owner repeats the details and an assistant copies them down in a ledger. The money disappears below the counter, the two shake hands and the man in the suit walks out. The owner apologises as he closes the book: "This is what we have to do to make a living," he says. The textile shop is a front for hawala, a form of money exchange that depends on trust and honour, but has been linked with terrorist financing and money laundering.

The person who wants to send money goes to a hawaladar and gives him the cash, together with the contact details of the receiver. The hawaladar telephones a counterpart in the destination country and tells him to give the same amount of money to the receiver, minus a small commission. The debt remains between the two hawaladars, who will settle it at a later date with cash or traded goods. Because there is no official record of the transaction, hawala has been used extensively to launder the proceeds of criminal enterprises.

The World Bank estimates that expatriate workers remit more than one quarter of a trillion US dollars to their home countries every year. - Gregor McClenaghan