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Hawala is recognized as a prominent example of an Informal Value Transfer System (IVTS). This system operates outside of the formal banking and financial institutions, relying instead on a network of money brokers or hawaladars who facilitate the transfer of money across borders. The process is often based on trust and personal relationships rather than legal contracts or paperwork, making it a significant method for transferring value, especially in regions where traditional banking is less accessible or reliable.

Unlike formal systems like bank drafts, wire transfers, and foreign exchange trading, which are all conducted through regulated institutions and involve formal processes, hawala operates in a more informal, decentralized manner. It illustrates how value can be transferred efficiently, particularly in contexts where cash flow is needed urgently but traditional channels are cumbersome or unavailable. This understanding of IVTS is critical in anti-money laundering responsibilities, as such systems can be susceptible to misuse for illicit financial activities.