Informal Value Transfer System (IVTS)

IVTS is the umbrella term. Hawala is the best-known example, and others include the Chinese fei qian system and the Black Market Peso Exchange. Many have long histories and serve people with limited access to banks. They share a pattern: a customer pays an operator in one place, a partner pays out in another, and the operators settle among themselves later. Value can be settled by return transfers, trade invoices or physical goods, so no formal wire may be sent. Operators are often shops or trading businesses that run the service as a sideline, and they may or may not be registered. IVTS creates laundering risk when records are weak and customers are not identified, and financial standards call for registration and monitoring of such operators. Banks watch their accounts for signs of large pooled cash, third-party payments and links to trading firms. Regulators write one set of registration and monitoring rules for the whole group, so a small shop moving value for others falls inside them even if it never calls itself a hawala.

A bank reviews a small exporter whose account receives frequent deposits from individuals with no obvious link to its business and pays out large sums to textile suppliers in several countries. Invoices do not match the payments. The bank concludes that the exporter may be settling for an informal remittance network and asks whether it holds a required registration.