It is a system that works purely on trust. You will not get a receipt for the transaction, and any loss that occurs will be solely yours. Unlike a proper bank transfer, hawala brokers contact their counterparts in India or any country to which the money has to be transferred. The counterparts then deliver the amount to the concerned person. Hence, it is said that there is no actual movement of money. This is a crime in any country.
Hawala is illegal also because there is no tax paid on the amount transferred. It is used extensively across the globe to circulate black money, to provide funding for terrorist activities, and drug trafficking etc.
As they don’t operate through proper channels like banks, hawala money escapes governmental regulations, which has become a serious cause of concern. Yet another threat is that hawala is often linked with equally serious crimes like murder, kidnapping etc.