@कुश You may call it Hawala/Hundi or just individual transaction but in reality its nothing but a MONEY LAUNDERING!!

To Be Legal: It has to be to RECORDED with GOVERNMENT entity (meaning it can be tracked)!! I don't want to go into details but Agents (LEGAL) they are authorized by Governments they have proper license to transfer money from one country to another!!

Money Exchange between two person (in this case) Cross Border comes into GRAY AREA!! In US CASH transaction above $10,000.01 has to be recorded and reported!!

Coming back to your case of individual money transfer, you are walking into the GRAY AREA!! If you need more info on this do consult with a Lawyer or CPA!!

(I may have a less idea on money laundering, as i have NEVER done the transaction and never intent too. But What I know is CROSS BORDER INDIVIDUAL MONEY TRANSFER DONE WITHOUT A RECORD IS ILLEGAL and is deemed as MONEY LAUNDERING!!

for reference: http://en.wikipedia.org/wiki/PATRIOT_Act#Title_III:_Anti-money-laundering_to_prevent_terrorism [look at last Para]

Also, The Act prohibits and penalizes those who run unlicensed money transmitting businesses. In 2005, this provision of the USA PATRIOT Act was used to prosecute Yehuda Abraham for helping to arrange money transfers for British arms dealer Hermant Lakhani, who was arrested in August 2003 after being caught in a government sting./Penalties were increased to 20 years imprisonment.

§ 1960. Prohibition of unlicensed money transmitting businesses

(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both. (b) As used in this section— (1) the term “unlicensed money transmitting business” means a money transmitting business which affects interstate or foreign commerce in any manner or degree and—