Saturday, 8 November 2008

Unnao Hawala Cash Captured while moving from Uttar to Sarjah India

Lucknow, Nov 9 (IANS) Two people were arrested from the Amausi airport in Uttar Pradesh capital late Saturday night while they were allegedly trying to smuggle Hawala money worth Rs.16 million, the police said.

The duo, who were at the airport to take a flight to Sharjah, were caught by the officials of the Directorate of Revenue Intelligence (DRI) under the Foreign Exchange Management Act (FEMA), according to police sources.

“We only know that the arrested persons belong to Unnao and the local police was not involved in the entire operation as it is a matter related to DRI,” Akhil Kumar, senior superintendt of police Lucknow, told IANS over phone.

The paper was in Saudi Ryals and Indian Rupees

The Rest @ ThaIndian

Thursday, 6 November 2008

Hawaladar Convicted of Conspiracy Money Laundering and Terrorist Financing


Baltimore, Maryland - U.S. District Judge Marvin J. Garbis sentenced Saifullah Anjum Ranjha, age 45, a Pakistani national residing in Washington, D.C. and Maryland, today to 110 months in prison, followed by three years of supervised release, for conspiring to launder money and for concealing terrorist financing, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Garbis also signed a preliminary order forfeiting $2,208,000 of Ranjha's assets.

"The hawala system can be used by criminals to launder money without using financial institutions, by giving the money to a person in the United States and picking it up in a foreign country," said U.S. Attorney Rod J. Rosenstein. "Identifying hawala networks that violate the law often requires the cooperation of international authorities."

"As the U.S. financial industry strengthens its anti-money laundering programs, the use of the hawala system to move illicit funds becomes increasingly attractive to terrorist and other criminal organizations," stated Scot R. Rittenberg, Acting Special Agent in Charge of U.S. Immigration and Customs Enforcement. "We will continue to work jointly with our domestic and foreign law enforcement partners to investigate the movement of illicit funds via the hawala system."

"Terrorist networks need money to be effective. Fortunately, IRS-CI is effective at following the money to find the source of the crime," said Internal Revenue Service-Criminal Investigation Special Agent in Charge, C. Andre' Martin.

  • According to his guilty plea, Ranjha was born in Pakistan and became a lawful permanent resident of the United States in September 1997.
  • He operated a money remitter business in the District of Columbia known as Hamza, Inc.

A cooperating witness, acting at the direction of law enforcement, held himself out to Ranjha and his associates to be involved in large scale international drug trafficking, international smuggling of counterfeit cigarettes and weapons.

He also represented that he was providing assistance and financing to members of al Qaeda and its affiliated organizations and their operatives.

From October 2003 to September 19, 2007, the cooperating witness gave Ranjha and his associates a total of $2,208,000 in government funds in order to transfer the monies abroad through an informal money transfer system called a "hawala," using a network of persons and/or businesses to transfer money across domestic and international borders without reliance upon conventional banking systems and regulations.

The cooperating witness represented that the monies were the proceeds of, and related to, his purported illegal activities and Ranjha laundered these funds believing they were to be used to support those activities.

Ranjha was the primary point of contact for the cooperating witness and received the bulk of the monies from the cooperating witness, for a total of 21 hawala transactions in amounts ranging from $13,000 to $300,000.

Most of the monies were turned over to Ranjha in locations in Maryland.

On a few occasions the cooperating witness met Ranjha and other co-conspirators at Hamza, Inc. to provide monies for a particular hawala transfer.

Ranjha arranged with his associates for the equivalent amount of monies, minus commissions, to be delivered to the cooperating witness, his third party designee, or a designated bank account in Canada, England, Spain, Pakistan, Japan and Australia.

Ranjha kept a commission of approximately five percent of the amount of currency sought to be transferred on each occasion.

Other conspirators involved in a particular transaction retained an additional commission of between three to five percent of the transaction amount.

All the funds transferred abroad were picked up by cooperating individuals and returned to the Government.

United States Attorney Rod J. Rosenstein thanked U.S. Immigration and Customs Enforcement, the Federal Bureau of Investigation and the Internal Revenue Service - Criminal Investigation for their investigative work.

In addition, Mr. Rosenstein thanked our international partners, the Spanish National Police; Australian Federal Police; London Metropolitan Police; and Royal Canadian Mounted Police for their help.

Mr. Rosenstein commended Assistant United States Attorney Christine Manuelian who is prosecuting the case.

Source: The US Department of Justice

Wednesday, 5 November 2008

Whu do Muslims Support Hawala and Charity Operations that Support Jihad?

A new article on SSRN attempts to address the question: why do individuals support the work of charities that support jihadist operations, even when they may not agree with these organizations' agenda? The paper, entitled "Microfinancing Terrorism: A Study in Al Qaeda Financing Strategy", by Tolga Koker and Carlos Yordan (my thesis adviser while at Hamilton College), asserts that social pressure--rather than ideology--motivates individuals to donate to charities that may be affiliated with the global jihadist movement.

To test this claim, the authors construct a social choice model, where individuals derive different utilities from their private preferences (to support a jihadist movement) versus their public preferences (community reputation). The authors conclude that because Middle Eastern cultures value the collective over the individual, people will eventually acquiesce to social pressure and donate to these charities because the utility gained through group participation outweighs that from individuality.

This a provocative argument, as it suggests there may be an endless supply of financing to jihadist groups like al-Qaeda, as Muslim may always submit to social pressure and contribute funds. While there is much value in examining the social dynamics within Muslim culture that lead to the "microfinancing of terrorism",

I am not convinced that the dynamic presented by the authors is what actually provides the bulk of support for these illicit financial networks. More likely, these groups are simply exploiting the global hawala system to laundering and redirect funds.

The Center for Contemporary Conflict has presented excellent work discussing how jihadist groups exploit hawla, and more recent studies have shown this network to be extremely efficient at moving money around the world.

This exploitation can occur completely outside the purview of the individuals using the system, which would conflict with the idea that social pressure is motivating direct financing of these groups.

Put simply, many Muslims can be supporting groups like al-Qaeda without even knowing it.

The Rest @ Zero Intelligence Agents

Sunday, 2 November 2008

Hawala is the Bank of the Somali Business Woman

NAIROBI, Nov 1 (IPS) - On the fifth day of every month a group of women entrepreneurs gather to share their experiences and discuss matters of trade. What makes this exceptional is that the women are from south-central Somalia and they meet in Mogadishu, one of the world’s most devastated and dangerous cities.

With 780 registered members, most of them from the Banadir region, the Banadir Businesswomen’s Association the association is headed by a veteran businesswoman, Shamso Abdulle. Banadir is of the eight administrative units in south-central Somalia which includes the capital Mogadishu.

A mother of nine, covered in a fashionable head-to-toe Islamic veil or hijaab, and insistent on speaking only in her mother tongue Somali, Abdulle is an unlikely business success story. The east African country where she lives has not had a central government for over 17 years.

The city where she lives has been ravaged by an unending internecine war between clannish warlords and by foreign military interventions.

‘‘When I started my business of importing furniture and other goods from India in 1984, Somalia was a different country,” Abdulle told IPS in Nairobi last week where she was attending a two seminar on the war economy of Somalia’s capital, organised by the Norwegian Institute for Urban and Regional Research.

‘‘For six years I was able to do normal trade and earn enough to be independent and expand my business to other places like Dubai.”

Then, in 1991, the civil war erupted. The state collapsed and the era of the warlords began. Like most other businesspeople, Abdulle had to abandon her business and flee the city.

‘‘I had to leave Mogadishu and live with my family in the bush for months. My savings were disappearing fast. As soon as the fighting receded a bit, with the intervention of a UN mission, I returned to the capital to explore the possibility of resuming trade,” she recalls.

On her return she found that the rules and norms of business had completely changed. The Mogadishu port was closed and would not open again until 2006, which forced businesses to other distant ports like El Ma’an, Merka and Kismayo.

Instead of government regulations and institutions, traders had to negotiate safe passage for their goodsùand for themselvesùwith an assortment of militias. Money transfers through banks had been replaced by the informal hawala, or hundi, system.

It was difficult for women to get loans from the big businessmen who saw no assurance of repayment or getting a return. The public’s purchasing power was down; the violence and insecurity was high, as it remains to this day.

But there was also a unique opportunity for women to step into business.

‘‘One of the main reasons why there are so many women traders in Mogadishu is because so many men died in the conflict or lost their government jobs. Also, working as street vendors or shopkeepers is considered beneath the dignity of men who before the war were working as doctors, lecturers and bureaucrats in Mogadishu,” explains Abdulle.

The Rest @ Global Intelligence

India Hawalas Undermining the Rupee Exchange Rate

American fund managers investing in the emerging markets today are fundamentally assuming that, over a given time horizon, profits from equity investments will far exceed losses from currency devaluations. That assumption needs to be contextualized in the reality that, if investments in emerging markets like India were made on a fully hedged (forex risk) basis today, mutual funds would be forced to realize significant losses in their financial statements at the very outset.

The Indian rupee far forward rate, to offset currency risk on 3-year equity investments, will result in a net loss of about 24% today for dollar investors. Thinly traded 5-year contracts to purchase dollars are being offered at a premium of 35%. Few fund managers are known to actually offset foreign exchange risk unless, of course, they are confronted with panic conditions, like those witnessed this month.

Forward premiums apart, the rupee has lost 20% of its value against the dollar during the course of this year. There are several reasons to anticipate another 15% move downwards by early 2009 and to predict a further widening of forward differentials. Interestingly, the single most powerful indicator of the fate of the rupee is the behaviour of “hot” money being generated every day by India’s huge and powerful underground economy.

Dubai’s “hawala” traders claim that over $300 million has left India’s shore this month alone; hawala currency exchanges are executed outside mainstream banking channels with an exceptionally high degree of anonymity. India’s central bank, which periodically intervenes in the inter-bank foreign exchange markets for limited durations, has no ability whatsoever to control the flow of cash in the hawala system. Further bad news from the global economy, like yesterday’s downgrade in Pakistan’s credit rating, will only increase hot money outflows.

Besides, the only inference one can draw form statistical data is that the Indian economy is now in reversal, as opposed to being in the midst of a cyclical downturn as many asset managers would like to believe, with several sectors contracting at an alarming rate. The default rate amongst 30 million credit card holders is likely to breach 22% before the end of this year, by conservative estimates. The crisis in housing will force most of India’s leading real estate companies to renege on their debt service obligations in forthcoming weeks. Speaking of consumer confidence, a recent survey showed that more than 50% of working Indians fear losing their jobs in 2009. Darkening the scenario are rising food prices, which have been steadily chipping away at the value of middle- and lower-income family incomes since the commodity boom began in mid-2007.

Before fund managers invest in India or, for that matter, in other emerging markets, they should ask themselves the same three questions which the holders of underground capital, the ones with most at stake on a daily basis, ask themselves each morning: How much of the phenomenal growth in consumer spending power in this decade can be attributed to easy credit? Is the debt-induced fairy tale coming to an end? And, perhaps most importantly, are poverty levels in the urban and rural centres creating the potential for deep-rooted social unrest?

The short India trade is justified by both, currency risk arbitrage considerations and the status of the Indian economy. Such a short trade may not be possible to execute in the equity exchanges. But the short India canvas is wide enough: buy synthetic shorts on exchange-trade India funds and shares on each rally, buy stock index puts in similar fashion, and buy 3-year sovereign default risk and far forward dollars now.

The Rest @ Quoteplatform