Over the years I have been instructed in many cases that have involved some form of money transmission business commonly referred to as Hawala and sometimes Hawala Banking. Most of my earlier cases involved investigating the accounting records for such businesses, until eventually I had become very familiar with the concept. I began to be asked to act as a Hawala expert, often in cases where very little accountancy had taken place.
There have been two cases recently concluding that demonstrate the different ways in which I am able to assist as a Hawala expert, both having satisfactory outcomes. A third case illustrates the difficulty in trying to use “Hawala” to cover up money laundering activity:
Legitimate aspects of Hawala
A businessman was working as an agent for a Saudi principal who wished to develop a portfolio of property in the UK. He sent funds to the defendant using Hawala as a method of transfer. The funds came via a circuitous route through Hawala agents in Syria and Cairo as is typical of this method. This of course looked highly suspicious to the western investigators who promptly charged the defendant with money laundering. Apart from tracing the relevant transactions, I was asked to explain the legitimate concept of Hawala to the Court. As a result, the jury acquitted the defendant in this case.
Hijacking of Hawala systems
An Indian businessman sold a family property and had the funds remitted to the UK. His lawyer in Delhi sent the funds via an unregulated Hawala operator, commonplace in India to avoid the Central Bank restrictions and officially pegged exchange rates. In the UK the defendant was asked to collect his funds as cash from a man in a supermarket car park. On receipt, he was promptly arrested by the police who had been monitoring a gang of organized money launderers.
My task as a forensic accountant and Hawala expert was to not only trace the transaction and explain the Hawala banking concept, but also to ensure that the instructing solicitors made sure they obtained supportable evidence from India demonstrating the legitimate source of the funds. In this way it was possible to show that the transaction had been hijacked by the criminals.
Hawala as an excuse for possessing cash
The fraud regulators have a massive job investigating organized money laundering which can be measured in trillions globally. They often “pounce” on individuals that are observed smurfing funds into lots of different bank branches and different accounts. When caught, these agents for the money launderers whose job is to spread criminal funds around in chunks small enough to hopefully go unnoticed, often plead Hawala as an explanation for what they are doing.
Sometimes the accounts in which the agents are depositing cash are owned by persons expecting funds, giving credence to the Hawala expert explanation. However, this process is well known to the authorities, and unlike the unwitting recipient in the last example the smurfers are paid to launder the money.
It is often quite hard to defend this courier activity. It represents unregulated financial services at the very least. In such cases and depending on the circumstances the best course of action appears to be that of mitigation. Forensic accounting work might include analysis of the smurfers’ finances to show how little commission has been earned and the lack of any connections with serious financial activity.
Hawala is a legitimate financial service within the UK. Transfer agents, often called Hawaladars, must register with the FCA and be monitored by HMCR. Such legitimate operators will keep proper records and conduct transfers though bank accounts – and not in supermarket car parks! They will deal in cash, when sending and remitting, but their records of due diligence carried out will show this. Where an otherwise legitimate Hawaladar is negligent or even just lazy in his regulatory duties, he leaves himself open to exploitation by the criminals and in doing so, will also put legitimate recipients at risk by his actions (as happened in the second example above).