In recent years, German courts have been increasingly confronted with the intricate legal questions posed by informal money transfer systems, particularly the widely used Hawala model. Traditionally rooted in trust-based financial practices common across South Asia and the Middle East, Hawala banking offers a parallel structure to formal banking by enabling cross-border money transfers without the movement of physical cash.
While this system often serves benign familial and humanitarian purposes, its lack of transparency, regulatory evasion, and potential misuse for criminal purposes have prompted intensified legal responses. Central to the jurisprudence is not only the criminal liability of those operating such systems, but also the challenging task of delineating when and how state authorities can seize or forfeit the associated financial flows.
Criminalization of Hawala Systems: Organizational Structure and Offences
German courts—most notably the Bundesgerichtshof (BGH)—have now firmly established that organized Hawala systems can meet the threshold of a kriminelle Vereinigung (criminal organization) under § 129 StGB. This interpretation hinges on the existence of a durable, structured association pursuing an overarching interest beyond the mere accumulation of individual profits. In 3 StR 61/21, the BGH described a transnational Hawala network as a highly organized and intentionally opaque shadow banking structure, explicitly designed to evade state supervision and anti-money laundering mechanisms. Similar findings were reiterated in 3 StR 278/22, where the BGH affirmed the collective aim of preserving and expanding the system as a shared criminal purpose.
This organizational context becomes the anchor for multiple layers of criminal liability. Participation in such a network typically constitutes both a violation of § 129 StGB and an unauthorized provision of payment services under § 63 ZAG (Zahlungsdiensteaufsichtsgesetz). The criminalisation of payment services under ZAG reflects the regulatory expectation that such services require formal authorization from the German financial watchdog BaFin. Individuals operating without such authorization—regardless of whether they profit from fees or merely facilitate transfers—face severe penalties. In 3 StR 414/22, for instance, the court reaffirmed that even facilitating or mediating payment transactions through unlicensed means constitutes a punishable offense.
The Nuances of Asset Forfeiture: Legal Challenges and Developments
Arguably more contentious than the issue of criminal liability is the question of asset forfeiture (Einziehung). Courts have struggled with the proper legal classification of funds moved through Hawala systems: are these proceeds of crime (Taterträge), instrumentalities of crime (Tatmittel), or mere objects (Tatobjekte)?
Earlier jurisprudence had, at times, overreached by treating all transmitted customer funds as criminal proceeds, thus making them subject to full confiscation under §§ 73 ff. StGB. However, a corrective trend has emerged. The BGH in 3 StR 278/22 forcefully distinguished between fees earned by the operators, which indeed constitute criminal gains, and customer funds, which, while used in the commission of the offense, are not themselves “gains” derived from crime. Instead, such funds are treated as either tools (Tatmittel) or objects (Tatobjekte) of the offense and are therefore subject only to discretionary forfeiture under § 74 StGB—provided they are physically seized.
This distinction has profound consequences. Where customer funds were simply passed along their intended path—say, from a sender in Germany to a recipient in Syria—they are no longer eligible for Wertersatzeinziehung (substitute value confiscation). The BGH explicitly stated that the correct use of the funds for their designated purpose within the Hawala model negates the existence of a forfeitable gain under § 73c StGB. As a result, the state cannot claim these values unless it has secured the actual cash.
Individual Complicity and Third-Party Forfeiture
Another complex issue is the legal exposure of those merely interacting with Hawala operators, such as customers or business partners. The decision of the Oberlandesgericht Düsseldorf in III-1 Ws 131/22 is instructive. It held that a car dealer who received cash from a Hawala-linked logistics firm, after having transferred funds abroad, could not be subjected to asset arrest under § 111e StPO. The court emphasized that such customers are not perpetrators under § 63 ZAG and are, in principle, protected legal interests rather than enablers of crime. Even allegations of money laundering failed, since the transmitted funds were not criminal proceeds but rather neutral objects of the transaction.
Thus, a clear doctrinal line is emerging: while Hawala operators themselves face broad criminal liability and the possibility of asset forfeiture, their clients and transactional partners are not automatically complicit and are protected against overreach in forfeiture proceedings.
Conclusion
Germany’s evolving jurisprudence on Hawala banking reflects a delicate legal balancing act between effective law enforcement and the protection of fundamental legal principles, particularly property rights and proportionality. The BGH’s recent rulings provide greater legal clarity, correcting prior tendencies to equate all Hawala-linked money flows with criminal gains. Instead, the courts have begun to draw nuanced distinctions between criminal profits, operational instruments, and neutral customer assets.
The overarching message is clear: operating a Hawala system without state authorization is a serious offense, particularly when done within a criminal organizational context. However, legal measures such as asset forfeiture must be proportionate, grounded in clear legal categories, and sensitive to the rights of third parties. In the intersection of financial regulation, criminal law, and asset recovery, Germany’s case law offers an increasingly sophisticated framework—one that other jurisdictions navigating similar informal financial ecosystems would do well to study.
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