The underground financial system keeping Iran afloat amid war, sanctions

A man walks into a Dubai currency exchange, intending to send money to Iran. He hands over $50,000 in cash, and provides a name and a location. Hours later, the money reaches a beneficiary in Tehran. No bank processes the transfer, no wire crosses a border, and no regulator signs off, yet the system worked as intended. 

With a ceasefire in place and a military blockade in the Strait of Hormuz, the Trump administration is ramping up its economic warfare against the Islamic Republic of Iran. Even so, a parallel system continues to move cash beyond Washington’s reach, even as the White House leans harder on sanctions and financial isolation. 

For more than a decade, Iran has been cut off from much of the global banking system. Sanctions made it harder to move money across borders, but it didn’t stop all of it. Iran has adapted: Rather than formal banking, it relies on exchange houses, brokers and informal networks across the Middle East, mostly in Gulf Arab states. This centuries-old system, called “hawala,” runs on trust, reputation and relationships. 

Billions of dollars in Iran-linked funds move through the Arab Gulf states each year, much of it through hawala-style networks. Hawala relies on personal ties. Records, if kept, are informal and brief. The system endures even when banks are shut out or sanctioned. It is a durable financial lifeline when formal channels fail.

The term “hawala” comes from the Arabic for “transfer” or “change.” At its core, hawala transfers to Iran are simple. A sender hands cash to a broker in Dubai, Kuwait or Istanbul. That broker contacts a partner in Iran. Within hours, the partner pays........

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