Hawala and Money

Laundering

By
AVINASH.S
NAVEEN K
NIKHIL MEHTA
SAGAR BIDARI
NARENDRA JAIN
G SUSHEEL
SATHYARAJ
 Contents
• Introduction
• Hawala: The Process.
• Why Hawala?
• Is Hawala Legal??
• Money Laundering.
• Money Laundering Methods.
• Cases: Example.
• Bibliography.
 Introduction

Hawala is an alternative or
parallel remittance system.
It exists and operates
outside of, or parallel to
'traditional' banking
or financial channels.
Hawala: The Process
MUSIC BAZAAR AND TRAVEL SERVICES AGENCY
 Cheap tickets to India, Pakistan, Bangladesh, Sri Lanka, Dubai
 Great rupee deals (service to India and Pakistan)
 Large movie rental selection
 Video conversions
 Latest Bollywood hits on CD and cassette
 Prepaid international calling cards
 Pager and cellular activations (trade-ins welcome)
 Conveniently located in Jackson Heights
(718)555-1111 ask for Nizam or Yasmeen
(718) 555-2222 [fax]
(718) 555-2121 [pager]
 Why Hawala?
• The primary reason is cost effectiveness.
• The second reason is efficiency.
• The third reason is reliability.
• The fourth reason is the lack of
bureaucracy.
• The fifth reason is the lack of a paper trail.
• The sixth reason is tax evasion.
 Is Hawala Legal?
• Though illegal from a regulatory standpoint
hawaladars advertise their services widely in
a variety of media including news papers.

• In INDIA, laws prohibit speculation in the local

currency, prohibit foreign exchange transactions
and impose strict licensing requirements on
money remitters and foreign exchange dealers.
 Is Hawala Legal?
• In addition, there are regulations governing
inbound and outbound remittances.

• The important point is that the existence of these

regulations is another reason hawala is still
used.
 Money Laundering
• Money laundering is the practice of
disguising the origins of illegally-obtained
money.
• The money involved can be generated by
any number of criminal acts, including
drug dealing, corruption, accounting and
other types of fraud, and tax evasion.
 Money Laundering
• The sophistication in money laundering
process ranges from simple to complex.
• FATF: an intergovernmental body set up
to combat money laundering, admitted that
“It is absolutely impossible to produce a
estimate of the amount of money
laundered and it does not publish any
figures in this regard."
 Money Laundering Methods
• Bank methods.
• Smurfing.
• Currency exchanges.
• Double-invoicing.
 Cases: Example
• Gambling.
The gambling operators have engaged
hawaladars to accept money 'on deposit' from
gamblers, and pay winnings through them as
well.
• Customs and Tax Violations.
 Cases: Example
• Narcotics Trafficking.
• Terrorism.
• Welfare Fraud.
 Bibliography
• http://www.interpol.int/Public/FinancialCrime/Mo
neyLaundering/hawala/
• http://www.fatf-
gafi.org/dataoecd/16/8/35003256.pdf
• http://www.treas.gov/offices/enforcement/key-
issues/hawala/
• http://tcdc1.undp.org/Remittances_Oct102005B.
pdf