The ‘hawala’ transaction is becoming the most favoured mode of converting black money to white money. The hawala mode of money transfer is a huge network of money brokers (hawala dealers) primarily located in Middle East, Africa and Asia.
According to an official figure on hawala transactions, almost `90 crore was laundered during the last year (upto October 2010) while the corresponding figures for 2008-09 was `932 crore, for 2007-08 `112 crore and during 2006-07 it was `110 crore. Hawala is an illegal mode of money transfer and it is regulated in India under the provisions of the Foreign Exchange Management Act.
Indian efforts to trace hawala operators involved in money laundering and terror financing are facing hurdles mainly due to non-cooperation of many countries where these dealers operate. The Government of India is trying to strengthen its tax treaties with certain tax havens, including Cayman Islands, Bermuda, Bahamas and Switzerland. But it appears this will take time before these treaties are in place.
Sources in the central revenue intelligence agencies say the number of hawala operators in India is increasing every year. Hawala operators in India mainly operate from Mumbai, Delhi, Kolkata, Jaipur, Chennai, Pune, Chandigarh and some other cities in south India. Right from turning black money to white, terror funding and overseas investments, these hawala operators are providing all sort of assistance to those who are interested. There are reports that some of the hawala dealers are directly linked to the D-company, led by underworld don Dawood Ibrahim, and operating out of Dubai. The most recent case where hawala operators have been used to allegedly launder money is the 2G spectrum scam where hawala was the main vehicle of transfer of money. The investigating agencies, including the Enforcement Directorate (ED), recently sent “Letter of Request” (LR) to authorities concerned in Isle of Man, Cyprus, Mauritius, the UAE, Norway, Singapore, Libya, and Russia in order to gather details about the alleged investments made by those who reportedly benefited from the 2G spectrum scam. The CBI, which is also probing 2G Spectrum scam, recently conducted raids at two suspected hawala dealers in Delhi-Mahesh Jain and Alok Jain.
Besides, the multi-crore hawala racket involving former Jharkhand Chief Minister Madhu Koda and his former cabinet colleagues is another important case where money laundering through hawala channels was a regular practice. The former CM has been booked under the Prevention of Money Laundering Act (PMLA) by the ED for alleged money laundering and acquiring huge movable and immovable assets by illegal means, worth several hundreds of crores, in the country as well as abroad through hawala channels. The ED has also booked three former cabinet ministers of the Madhu Koda government under the PMLA.
Apart from this, the ED in 2010 booked alleged Hawala operator Naresh Jain under the PMLA. Investigations by the ED revealed that the alleged hawala operator used to help Albanian narcotics traffickers to move their proceeds from the contraband out of Italy into a financial network based in the UAE.