The world of finance is greater than the well known handful of banks and institutions that can be found on our high streets and city centers. Not all business must be conducted by global giants, and indeed it is gratifying that there are so many challenger banks and other financial institutions out there offering us a wide choice in a competitive marketplace.
Hawala is a catch-all term that seems to be used by many to describe any money transfer method that is not a traditional banking system that might be associated with the likes of Lloyds, Barclays, HSBC etc. Yet the Hawala transfer mechanisms favored by various ethnic populations who have migrated to the West, and which have grown out of historic methods for moving money that were being developed long before the establishment of the western banking system, are viewed with great suspicion by western money laundering regulators.
Why should this be? Any money transfer agency that opens a business in the UK must comply with the same layers of regulation that are heaped upon Lloyds and Barclays. They are monitored by HMRC and the FCA in just the same way. Yet, Hawala is central to many of the fraud and money laundering cases where I am asked to investigate and report. Hawala is often cited as a reason for moving proceeds of crime, when persons may be apprehended in possession of large quantities of cash and in suspicious circumstances. It is therefore no wonder that the police and customs officials are so cynical about believing excuses that cite Hawala when cash is seized following surveillance of criminal gangs.
The problem is that the very nature of money laundering means that the crooks who find themselves holding large sums of “street cash” must interact somehow with legitimate concerns in order to give their illicit gains that veneer of legitimacy they need in order to enjoy the fruits of their activities! At some point, a criminal must swap dirty money with an innocent party – this is the fundamental “theory” behind money laundering. Unfortunately the innocent party is often caught receiving the criminal funds, or the tainted money can otherwise be traced to their bank accounts.
There may be those who use Hawala in full knowledge that it is often exploited by organized money laundering gangs. There are others where its use is seen as a cultural preference or in some cases, is the only practical method for transferring funds. In a recent case, the Crown attempted to seize some £ half million deposited in a UK bank account. It was known that the defendant had used Hawala to transfer the money in a series of transactions from Iran to the UK. The money was deposited in the UK by Hawala agents. The problem arose because the UK Hawala agents were not properly registered as Money Transfer Businesses (“MSBs”) with HMRC and the FCA.
Forensic Accounting Reports for Hawala
On investigating full details of the money being transferred I found that the money originated from legitimate property sales in Iran, on which all local taxes had been paid. The money was deposited in Iran with Hawala agents that had been identified by the defendants solicitors in that country. As a result of international sanctions against Iran, banks in the UK chose not to accept Iranian money transfers (though it would not have been illegal to do so). Therefore, the defendant used the only practical means to transfer her legitimate funds as advised by her Iranian lawyers. The total deposits made with the Hawala agent in Iran matched penny for penny the funds arriving in the UK into the defendant’s bank account.
The robust challenge to the forfeiture application made by the defendant’s UK lawyers assisted by my full explanation of the particular Hawala system being used meant that the Court accepted the defendant’s claim to the funds and the forfeiture order was defeated.
This was of course a good result for the defendant, who in all innocence had funds that would otherwise be trapped in Iran. In my view, the Crown had attempted to find an “easy” target in the defendant, whereas they should have followed up detailed inquiries into the unregistered Hawala agents in the UK. I understand these investigations were dropped at an embryonic stage.
Preparation of Expert Money Laundering Reports
I can understand why many such money laundering investigations are curtailed. Investing financial crime is lengthy, sometimes tedious, work. Pages and pages of bank statements for multiple accounts need to be analyzed with copious review of countless other witness statements, receipts and other items. I should know because my work involves presenting simple answers distilled from thousands of pages of such documents, and it can be time consuming.
A solution needs to be found for the ease with which legitimate parties can interact with illegitimate ones. For example in the case above, how was it possible that the Iranian Hawala agent was able to send money to the UK only for it to be received by unregistered agents? Although countries around the world attempt to reach acceptable standards of anti-money laundering compliance and maintain a respectable place on the global financial stage, most restrict the rigorous application of a regulatory framework to their own country. This means that less attention is place to where the funds are “going” than where they have “come” from. This seems to encourage well respected operators in their own countries to employ the services of money laundering gangs based in Dubai and Hong Kong to facilitate international money transfers! The Iranian funds may have been electronically transferred to Dubai in the above case, but who is to say that the actual cash being deposited within the UK has not been sourced from local UK crooks laundering their gains?
Hawala Expertise For Criminal Defence Expert Reports
As a tax payer and law abiding citizen I fully support the fight against global money laundering. Of course the Crown hopes to win every money laundering or cash forfeiture case that it brings, however often there is some doubt over the involvement of certain defendants. Very often my input can highlight the vulnerability of Hawala to exploitation and clarify the interface between the legitimate parties and the criminals – the sometimes grey line between good and bad. On many occasions this has led to the acquittal of a defendant, in others it has provided an insight into the workings of Hawala, its vulnerability to exploitation and it has demonstrated the relative strengths of the Crown’s case.