Hawala AML compliance in the UAE is no longer a concern only for remittance operators. Under Federal Decree-Law No. 10 of 2025, in force since 14 October 2025, any business, bank or exchange house that handles hawala-linked funds must show that it identified the risk, screened the parties and reported what looked suspicious.
Hawala is lawful in the UAE only when the provider holds a registration certificate from the Central Bank of the UAE (CBUAE). Outside that perimeter, it is an informal value transfer system that leaves little paper trail, which is exactly why criminals favour it.
This guide explains how hawala works, where it is exposed to money laundering, terrorist financing and proliferation financing, and what current UAE law expects of you. If you need an AML framework that stands up to regulatory review, the AML compliance team at Jitendra Chartered Accountants can help.
What Is Hawala and How Does It Work?
Hawala is an informal value transfer system in which funds move across borders without being physically sent. It runs on trust between brokers, known as hawaladars, who settle with one another later through trade, cash or net settlement. That settlement method is what separates hawala from other money transmitters, according to the CBUAE.
Who is involved
- Remitter: the person sending value
- Originating hawaladar: takes the money and instructs a counterpart abroad
- Receiving hawaladar: pays out in the destination country
- Beneficiary: the person who collects the funds
How a transfer typically runs
- The remitter agrees the amount, fee and a passcode with the originating hawaladar.
- The originating hawaladar passes the instruction and passcode to a hawaladar near the beneficiary.
- The beneficiary quotes the passcode and receives the funds locally.
- The two hawaladars settle their balance later, often through trade transactions or offsetting flows.
Legitimate use is common. Lower fees, speed and reach into areas with limited banking explain why many expatriate workers use hawala. The same features also appeal to launderers, which is where the compliance risk begins.
Is Hawala Legal in the UAE?
Yes, but only through registration. No person may carry on hawala activity in the UAE without a Hawala Provider Certificate issued by the CBUAE under its Registered Hawala Providers Regulation (Circular No. 24/2019).
What a registered hawala provider must have
- A CBUAE certificate, valid for one year and renewable
- Hawala activity added to its commercial trade licence
- A UAE bank account used for settlement
- Registration on the FIU’s goAML portal and the CBUAE’s reporting systems
What it may and may not do
- Permitted: non-commercial personal remittances, and transfers that support commercial operations
- Not permitted: taking deposits, exchanging currency, selling travellers’ cheques, lending, or exchanging virtual assets
- Not permitted: using agents inside the UAE, or executing transfers for another UAE hawala provider (known as “nesting”)
Unregistered hawala is unlawful. CBUAE guidance also tells banks not to accept unregistered UAE hawala providers as customers and to report them to the FIU.
CBUAE’s hawala guidance took effect on 15 August 2021 and was drafted under the earlier AML legislation. It is still listed as in force on the CBUAE Rulebook, but its article references should now be read against Federal Decree-Law No. 10 of 2025 and Cabinet Resolution No. 134 of 2025.
Why Hawala Is Exposed to Money Laundering and Terrorist Financing
The CBUAE notes that banks almost always rate hawala providers as very high-risk customers. The reasons are structural.
- Thin records: outside registered channels, little identification or documentation is kept
- Coded instructions: passcodes replace formal paperwork
- Offsetting settlement: money often never crosses a border, which breaks the audit trail
- Trade-based settlement: invoices can be over- or under-valued to balance the books
- Mixed businesses: some providers also run cash-intensive trades, which allows funds to be commingled
- Reach: networks extend into high-risk and conflict-affected jurisdictions
Hawala can be misused at every stage of money laundering. Placement happens when large cash sums are accepted without questions. Layering follows as value moves through offsetting transfers. Integration completes the cycle when the funds return looking legitimate.
For terrorist financing, hawala matters most at the moving stage. For proliferation financing, it can conceal payments for sensitive goods destined for sanctioned or high-risk countries. Federal Decree-Law No. 10 of 2025 now treats proliferation financing as a core offence alongside money laundering and terrorist financing.
The CBUAE also records that the FATF’s 2020 mutual evaluation of the UAE weighted money or value transfer services, including hawala, as highly important in terms of risk and materiality.
Red Flags for UAE Businesses, Banks and Exchange Houses
For businesses and DNFBPs
- A customer insists on paying through unrelated third parties
- Payments arrive from jurisdictions with no link to the contract
- Invoices do not match the goods, quantities or market prices
- Repeated cash payments just below due diligence thresholds
- The counterparty cannot explain its source of funds or ownership
- A customer withdraws when asked for identification or documents
For banks and exchange houses
These indicators are drawn from CBUAE guidance on accounts that may be used for concealed hawala activity.
- Frequent deposits by multiple individuals into one account, followed by international transfers
- Business accounts with large flows but no payroll, supplier payments or similar activity
- An account used as a temporary repository, with funds moved on quickly
- Third-party accounts used to disguise the true flow of funds
- A sudden shift from low-value to high-value international transfers
- A customer suspected of acting as an unregistered hawaladar
If you spot these signs, do not alert the customer. Escalate to your compliance officer and consider a suspicious transaction report through goAML. Tipping off is a criminal offence.
Key AML Obligations When Hawala Is Involved
Registered hawala providers
- Appoint a compliance officer and run a risk-based AML/CFT programme
- Complete a documented risk assessment at least once a year
- Perform identification or due diligence before every transaction, including for repeat customers
- Refuse the transaction if the required information cannot be obtained
- Keep records for at least five years
- Upload transfer data to the CBUAE daily and submit settlement statements quarterly
- Report suspicious transactions through goAML without delay
- Screen against UN and UAE sanctions lists, freeze matched funds within 24 hours and report within two business days
- Arrange a periodic independent audit by an external auditor approved by the CBUAE: annually for large providers and every two to three years for small ones
Banks, exchange houses and other entities dealing with hawala providers
- Physically check the original CBUAE registration certificate and the trade licence that includes hawala activity
- Never onboard an unregistered UAE hawala provider; report it to the FIU and inform the CBUAE if one is detected
- Treat hawala customers as higher risk, apply enhanced due diligence and monitor more intensively
- Understand the intended use of the account, the expected activity and the jurisdictions served
- Review high-risk customer files frequently; CBUAE guidance gives twice a year as an example
How to Reduce Hawala-Related Risk in Your Business
- Run a business or enterprise-wide risk assessment that covers payment channels, counterparties and geographies.
- Adopt written AML/CFT policies and procedures approved by senior management.
- Apply customer due diligence and enhanced due diligence, including source of funds and source of wealth, and verify beneficial owners.
- Screen customers, beneficial owners and counterparties against UN and UAE sanctions lists before each transaction.
- Monitor for structuring, third-party payments and activity that does not fit the customer profile.
- Register on goAML and set a clear internal route from alert to suspicious transaction report.
- Train staff to recognise red flags and to avoid tipping off.
- Test the programme through an independent AML review.
How Jitendra Chartered Accountants Can Help
Since 2001, Jitendra Chartered Accountants (JCA) has supported businesses across the UAE with audit, accounting, tax and compliance. Our AML team helps you turn regulatory expectations into controls you can evidence to a regulator or a bank.
- AML/CFT framework development: policies, procedures and risk assessments aligned with current UAE law
- AML compliance support: ongoing guidance on due diligence, monitoring and reporting
- goAML registration and reporting: support with suspicious transaction and other reports
- AML training: role-based sessions for management and front-line staff
- Forensic audit and internal audit: independent testing of controls and review of unusual transactions
Not sure whether your payment flows carry hawala exposure? Talk to us before a regulator or your bank asks.
Frequently Asked Questions
Is hawala legal in the UAE?
Yes, but only when the provider holds a CBUAE Hawala Provider Certificate. Carrying on hawala activity without registration is not permitted.
Which law governs hawala AML compliance in the UAE?
Federal Decree-Law No. 10 of 2025 is the principal AML, CFT and CPF law, and Cabinet Resolution No. 134 of 2025 contains its Executive Regulations.
Can a UAE bank open an account for an unregistered hawala provider?
No. CBUAE guidance says banks must not accept unregistered hawala providers based in the UAE, and must report them to the FIU and inform the CBUAE.
