A living financial fossil, hawala: the evolution of informal fund transfer systems in Korea

Abstract Informal fund transfer (IFT) systems, originally known as hawala, have persisted globally despite being outlawed, continuing to operate in the face of numerous challenges and hostile environments. They can be seen as a “living financial fossil.” However, few studies have explored how IFT systems survive and adapt under such circumstances. This study examines IFT systems as an illegal remittance market, emphasizing that the core dynamics among the actors involved center on trust and the risks associated with it. By analyzing 467 IFT case reports and conducting interviews with experts in Korea, where IFT systems face significant challenges and are regarded as illegal and illegitimate, this research investigates how IFT users and agents navigate the risks they encounter. The findings reveal that while traditional IFT systems, which rely on implicit and tacit mutual trust, are declining, these systems have evolved by leveraging their existential competitor, the banking sector, and their emerging rival, crypto assets, to address their inherent weakness — uncertainty and vulnerability.