Hawala Banking Expert
Mark Jenner & Co Limited continues to receive several instructions each year as forensic accountants where the issue of Hawala Banking is central to the matter. In fact, Hawala has become a much overused term, with the name being applied to all manner of money transfer systems favoured by ethnic communities around the world. The authorities now use the term “Hawala and Similar Service Providers” (HOSSPs) in an attempt to cover various different styles of international money transfer business.
All Hawala and other non-mainstream money remittance services are called “Money Service Businesses” (MSBs) in the UK. They have to be regulated by the FCA and HMRC and follow strict guidelines for running their business in order to comply with the anti-money laundering framework. Directors in charge of such businesses have to ensure they have strict controls in place to prevent the chance of being exploited by organized money laundering gangs.
For the most part, people receiving money through the Hawala system in the UK are not aware of the risk attached to this form of alternative remittance, which is closely monitored by the authorities. Sometimes they are not even aware what for of remittance system is being used, and simply see money turning up in their bank account. Other times they are asked to pick up cash, sometimes large sums are involved and the handover might be a supermarket car park!
Mark Jenner & Co Limited has assisted in cases where legitimate victims have received money as cash or into their accounts, unaware that their legitimate funds have passed through the hands of money launderers. Other cases have involved the examination of Hawala businesses, reconstructing the business records and determining profitability.
Forensic Accounting In Hawala Banking Cases
Some examples of cases where Mark Jenner has been instructed as named Hawala Expert in money laundering, tax evasion and other criminal cases:
- A Bradford based Hawaladar who ran his business from home between 2004 and 2007 and transmitted £40 million over 4 years to India, Pakistan and Hong Kong. HMRC had assessed the profit margin at around £500,000 over the four year period but this was reduced according to the forensic accounting report at trial to significantly less than £100,000;
- A Bradford based MSB who transferred several £millions every year both into and out of the UK alongside his local travel agent business, became connected to an operation to import drugs in around 2007/08. The forensic audit of the business records established the underlying legitimacy of the Hawala style business;
- A Birmingham based Hawala business with agents around the UK received money from and sent money abroad between 2004 and 2008, normally via Dubai to customers’ families in Somalia. Forensic accountancy work established the legitimacy of funds flowing from a UK business involved in an entirely separate fraud that was using the Hawala route;
- A well known but controversial listed Indian company regularly sent large sums of money to the UK in 2012 to fund its global expansion programme, using the Hawala system due to currency regulations within its own country. The forensic investigation work confirmed the legitimacy of the funds sent from India, but indicated how Hawala organisations in the UK can be hijacked, impersonated or controlled in order to distribute tainted funds within the UK;
- A substantial Hawala business served a local ethnic community in the UK, sending funds to Afghanistan via commercial entities in China. In this way trade between China and Afghanistan was taking place, with funding facilitated and balanced by the flow of value between expats in the UK and their families in Afghanistan. This legitimate, but often confusing characteristic was explained to the Court in order that the legitimate aspect of the business could be separated from the money laundering operation that had hijacked the naïve operators of the Hawala business;
- Between 2009 and 2012 an individual purchased UK property on behalf of a Saudi businessman. Funds were transmitted to the UK using the Hawala system via intermediary destinations including Turkey and the Lebanon. The individual was accused of laundering money. The expert witness oral evidence included a detailed explanation of the Hawala Banking principles and a comparison with conventional Western banking and assisted with an acquittal in 2015 by the jury;
- A MSB employee was accused of money laundering around £10 million between 2008 and 2012 by processing cash transfers through the branch of the remittance agency where he worked. The defence expert accountant’s report provided a full explanation of the concept of Hawala banking and by providing a joint statement with the Crown’s money laundering expert allowed the mechanism to be accepted by the court;
- An Indian businessman was expecting £50,000 from a property sale in India but was handed £250,000 cash. Investigations in India including interrogation of the local Hawaladar’s computer system revealed that a genuine mistake had been made during the transfer process;
In addition to these and other legitimate Hawala businesses (that had become connected to other aspects of criminality) I have also investigated many cases of money laundering where Hawala banking has been presented as an explanation for criminal activity, including possessing large sums of cash and disposal of cash reserves through the process often referred to by the investigating authorities as “cuckoo smurfing” – thus observing both legitimate and criminal aspects of what is commonly referred to as Hawala Banking. Often the criminal gangs employ unsuspecting individuals or businesses as links within their operations.