Hawala 2 0: How India’s oldest black money network changed gear to beat note ban

Jain, it said, also facilitated parking of funds abroad by Indian nationals through his international hawala transaction structure created in India and in various other jurisdictions. Identified as Mohammad Yaseen, the accused was arrested at the Jammu bus stand possessing the terror funding amount of Rs 10 lakh. Altaf and Javed hailed from Rajkot’s Dhoraji village, the officer added. While Javed has been living in Agripada for a long time, Altaf had come to Mumbai in 2009 and had allegedly been working for Javed’s hawala network. “Probe is on to find out if there are more people who worked for Javed,” the officer said. “During interrogation, Javed has claimed that he did not know that he was transferring money to an ISI agent.

A DRI official said that some bullion dealers, licensed to import gold for sale in the country, were also the main buyers of contraband gold that comes through the hawala stream. Kerala – especially some northern districts – is a major outlet for gold jewellery. Insiders reveal Rs 200 crore comes to India daily through the hawala channel from the Gulf, out of which 70 per cent is used for gold smuggling. With gold supplies hit and the beginning of the wedding season, the metal will be procured from all sources. According to a police source, the accused recently received Rs. 24 lacs from a source based in South Africa.

Often used to facilitate illicit or illegal transactions.

Be it physical or digital, the movement of money signifies value and hope to the millions involved. Money transfer operators, banks, and fintechs have played a remarkable role in enabling seamless money transfer in a quick, secure, and convenient manner. A 48-year-old Delhi based garment trader allegedly working as an agent in routing hawala money to terror outfits Lashkar-e-Taiba and Al Badr has been arrested from here, police said on Friday.

An authorized dealer of foreign exchange is normally a bank specifically authorized by the Reserve Bank of India under Section 10 of FEMA,1999, to deal in forex or foreign securities. The hawala system is fast and efficient because hawala brokers can quickly and easily transfer funds between two parties without going through the traditional banking system. This means that if any person wants to act as a dealer in foreign exchange, he has to be registered with the RBI. Over a period of time he got into Hawala transactions and would deliver any amount of money to any person in India, China or any other country across the globe. He invested either directly or through nominees and entities and made huge profits through transactions which were later on termed as ‘wash’ or unreal transactions by the US government, according to the second officer cited above.

In Kochi alone, there were nearly 10 such major agents, an official said. Normal transfer of funds may fetch them a commission of 1 to 5 per cent of the total value, if what some of them told the officials is true. Invoice manipulation, for example, offers the hawala agents in Kerala the perfect cover for their “unofficial remittance business”. Many hawala agents are often involved in businesses where the transfer of money on a regular basis arouses little suspicion.

Tale of Money Transfers: From Hawala to One-click Remittances

There are a set of hawala brokers who are usually called as hawaladars who collect the money. Once the money is handed over it is the duty of the hawaladar to contact his agent in another country. The money is then moved to the agent who is also given a password which needs to be quoted by the person intended to receive the money. Is commonly used to send money to family members who live in rural areas. This is because many rural areas in India do not have access to traditional banking services.

The problem today is that this form of transfer has caused a headache to security agencies since terrorists and the underworld and even the politician wanting to receive illegal funds at the time of an election has used this method. Top police officials continue to maintain that there is no evidence as yet to show that the hawala routes in Kerala are being used to fund terrorist or anti-national activities. Director-General of Police Hormis Tharakan said at a recent press conference that initial doubts about the funds being used in the Coimbatore blasts had not been confirmed and that the inquiries had drawn a blank. But DoE and DRI officials maintain that they cannot confirm that the money deposited in the banks in Kerala and withdrawn immediately is distributed among families of migrants alone. None of those arrested has revealed the identity of the final beneficiaries.

• Is an informal value transfer system that operates outside of traditional banking channels.
• A senior official said that a portion of the Rs.708 crores might have come in as “compensatory payments” to hawala agents who had delivered the remittances earlier to families of Gulf-based Malayalees in Kerala.
• Unlike the various procedures and requirements needed by banks and other institutions, hawala brokers barely require any documentation.
• The fake Rs 2,000 notes, though, are worryingly close to the original, mimicking 11 of the 17 security features.
• UPI eliminates the need to enter complex bank account details to initiate a money transfer.
• This operator, who is approached by the illegal immigrant for transferring his money to India, makes a promise to the man, now illegally staying in United Kingdom.

This is because hawala brokers can quickly and easily transfer funds between two parties in different countries. Unlike the various procedures and requirements needed by banks and other institutions, hawala brokers barely require any documentation. “Jain used the technique of ‘layering’- a money laundering technique that seeks to disguise the origin of funds.

Indeed, hawala agents in Dubai are increasingly diversifying into smuggling of the yellow metal. They are partnering with smugglers to grab a share of the growing business. According to the police, Yaseen is a garment trader by profession, but works as a conduit for hawala money. He collects money, funded from his sources abroad and delivers them to his networks in J&K.

The hawala link to gold smuggling

The way of operation of all Hawala transactions are same, everywhere in the world. Hawala money transfer system transfers the money from the sender to the receiver; but it never moves the money in question physically, from one place to another place, in a transaction. Hawala is a money transferring and money remittance system that works on the basis of number of middlemen working to make this money transfer possible.

Significantly, in the case under investigation, officials found that during the period under scrutiny the huge deposits were invariably made in the “new-age banks”, which are eager to grow and in which managers are given incentives to increase deposits and transactions. The Mumbai accounts, where the crores were deposited, were in Lord Krishna Bank , Vysya Bank , Indian Overseas Bank , Karad Urban Cooperative Bank , Catholic Syrian Bank , Nedungadi Bank , Bank of India , Federal Bank and South Indian Bank . During the operation, the police arrested two hawala agents who were trying to move the unaccounted cash on a two-wheeler.

On Monday, the agency said it has attached assets consisting of residential properties and industrial plots located in Delhi, Rajasthan and MP worth around Rs 66 crore. The assets were in the name of Bimal Jain, Sunita Jain, Vijay Agrawal and companies owned and controlled by Naresh Jain, who was arrested last year. The accused allegedly contributed to the funding of Lashkar-e-Toiba and Al-Badr terror groups. The accused, identified as Mohammad Yaseen, allegedly contributed to the funding of Lashkar-e-Toiba and Al-Badr terror groups.

Over a thousand people, of the town’s population of 53,986, are said to be directly linked to the kuzhal panam or ‘tube money’ operations, as hawala is known locally. A senior Enforcement Directorate official estimates that Koduvally’s hawala operators do transactions worth around Rs 150 crore a day, among the largest such underground cash operations in the country. Days after the RBI’s November hawala agents in india 8 withdrawal of high-denomination currency notes, Kerala’s hawala network went into complete paralysis. The illegal hawala pipeline funnels what the Directorate of Revenue Intelligence and the Kerala police estimate to be Rs 40,000 crore between the Gulf countries and India’s southern-most state. Overnight, this parallel banking network was stuck with useless currency worth thousands of crores.

hawala money illegal finance transaction funds

This system of money transfer is now practised in all countries, all over the world. The hawala system is still in use as an alternative to the remittance channels and traditional banking systems. The hawala system is the oldest form of money transfer that dates back to the 8th century. Known as the “money transfer without money movement,” it was actively used in India, the Middle East, and South Asia. During interrogation, Yaseen revealed to the police that hawala money was being routed to India through South Africa and collected in Surat and Mumbai.

Police officials say the jewellery trade too feeds off hawala money and its ancillary gold smuggling activities. Gold smuggling operations help hawala networks double their profit margins. “Hawala networks earnRs 7 lakh for every Rs 1 crore they invest in gold smuggling. Rs 1 crore in Dubai can buy you three gold bars weighing a kilogram each. With the help of customs and airline crews, gold can be smuggled to airports in Kerala or Mumbai,” he says. Over the past five years, gold smuggling between Dubai and Kerala has surged. Couriers come in all forms-on January 23, 2017, Kochi customs even arrested a Catholic priest, Fr Isaac Kizhakaeparambil, with 300 grams of gold bars concealed inside chocolate bars in his baggage. Koduvally town in Kozhikode district is the state’s ground zero for the hawala trade.

What Is the Hawala System and How Does it Work?

If he sent this money through Authorized dealer, he receives rupees at prevailing exchange rate of INR 19/AED. The exchange rate for the same in uncontrolled is INR 22/AED. Finance minister Nirmala Sitharaman asked state-run banks to review their business models closely to identify stress points, urging them to remain vigilant amid a deepening banking crisis in the US and Europe. “The total proceeds of crime generated by Jain and his accomplices in the form of commission on these hawala and domestic accommodation entry transactions detected till date is Rs 565 crore,” it said. During the checking of a two-wheeler at Himayat Nagar, the police found unaccounted cash of Rs 1.27 crore from Phani Kumar Raju.

There are restrictions also imposed under Article 4,5,6 and 7 of the FEMA Act. As the Hawala dealers do not comply with the above article, the transactions carried out by them are illegal. Enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person. The UAE Hawala operator’s counterparty in India, pays INR 22/AED to the family members of NRI in Mumbai. The transaction between Hawala dealer in AED and his counterparty India are not done through authorized dealers and there is no official record of this transaction. “He is probably one of the biggest hawala dealers in the world having links in Europe, US, Africa, Middle-East, India and Pakistan,” said an officer.

The two persons arrested by the task force police and 1.27 crore cash was recovered in city on Wednesaday. Further police team is investigating into the matter to find out other networks involved in this terror funding. Under the Prevention of Money Laundering Act , hawala is illegal if the proceeds from such transactions are used for money laundering.