Q1. With reference to the phenomenon of “digital hawala”, consider the following statements:
- Digitisation of hawala necessarily eliminates the involvement of cash by shifting the entire transaction into virtual assets.
- Virtual assets, including stablecoins, can serve as a mechanism for settlement within digitised hawala networks.
- Digital hawala may involve the use of formal financial infrastructure such as payment service providers and virtual IBANs.
- Artificial Intelligence can facilitate hawala operations by automating transaction structuring and routing through mule accounts.
Which of the statements given above are correct?
(a) 1, 2 and 3 only
(b) 2, 3 and 4 only
(c) 1 and 4 only
(d) 1, 2, 3 and 4
Answer: (b)
Explanation:
- Statement 1 is incorrect: Digitisation does not replace cash completely. FATF notes that cash can remain important, particularly at collection and exit points.
- Statements 2, 3 and 4 are correct: Digital hawala can use stablecoins/virtual assets, formal digital infrastructure such as payment service providers and virtual IBANs, and AI-enabled transaction structuring and mule-account routing.
