These activities are prohibited by law in many jurisdictions around the world due to their potential for money laundering, tax evasion, and other forms of financial crime.
However, I can explain what these terms generally mean, without endorsing or encouraging such activities.
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Hawala: This is an informal method of transferring money without any physical money actually moving. It is based on a system of trust that exists between a network of money brokers. This system is used in many parts of the world, especially in regions where traditional banking is less accessible or trusted. It is also often used for remittances—money sent home by workers in foreign countries. While it is illegal in many places due to its potential for misuse, in some countries it operates in a legal grey area or is even formally recognized and regulated.
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Under-Invoicing: This is a form of trade fraud where the value of goods or services on an invoice is intentionally understated. This can be used to evade taxes or duties, launder money, or circumvent currency controls. It's considered illegal in most jurisdictions and is a form of tax fraud.
Again, it's important to clarify that these practices are illegal and unethical, but I can provide a hypothetical example to help you understand how these systems could theoretically work. This is for informational purposes only and should not be seen as advice or endorsement of illegal activities.
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Hawala: Let's say Person A in Bangladesh wants to send money to Person B in the UAE. Person A would go to a local hawaladar (Hawala broker) and give them the money they wish to send, along with a small fee for the service. The hawaladar in Bangladesh then contacts a hawaladar in the UAE, and tells them to give an equivalent amount of money to Person B. The two hawaladars settle their accounts through other means, either by transferring money through a bank at a later time, through the trade of goods, or by other transactions.
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Under-Invoicing: Suppose Company A in the UAE sells goods to Company B in Bangladesh. To evade import duties, they might declare the goods as being worth less than their actual value. For example, they might state that goods worth $10,000 are only worth $1,000. This reduces the amount of import tax that Company B has to pay. The remaining $9,000 could be transferred using the hawala system described above, to evade detection by the authorities.
Again, both of these practices are illegal and unethical, and can result in severe penalties, including imprisonment. It's also worth noting that they can have harmful effects on the economy, including tax revenue loss, unfair trade practices, and destabilization of financial systems. It's always better to conduct business in a legal and transparent manner.