What is Hawala System?
Hawala system is an alternative money remittance system primarily practiced in South Asia, Middle East and North Africa. This informal fund transfer system is also addressed as Hundi and it operates via a large network of brokers, also known as ‘Hawaladars’. The origin of the Hawala system remains in classic laws of Islamic religion. In general the basic Hawala transactions take place by transferring money without actually moving it.
How does Hawala System works?
It has emerged as a popular process of money laundering, a method through which the black money earned from illegal sources are converted into white money. This process has no doubt grown into popularity amongst the corrupted cult of politicians and business men in India and abroad. In short Hawala meaning is an undercover alternative banking method for global money transaction that is primarily based on trust. NGO’s and Trusts are being used as safest method to do Hawala Transactions.Since money received by these organizations is tax free and no investigation is done.
Why it is used and by whom?
It is also used to transfer money from the owner’s country of domicile to a foreign country. Often people transfer their illegally earned money from one part of world to another without entering the normal banking procedure. Thus Hawala transaction works as a perfect alternative money transacting method much sought by people involved in illegal trades. Also it is a much coveted money transferring method amongst illegal workers residing at highly developed countries.
Corruption and Hawala system in India : Some real Facts
Unfortunately, in India many of the eminent politicians and business tycoons use the same means to transfer lump sum to their foreign accounts. The Hawala transaction is quite straight forward and convenient for those who are aware of it. In fact it is a centuries’ long practice that seem to remain in popularity in future.
Politicians in India earn large sums of money from illegal sources and the black money is neither recorded nor taxed by the government. Since this is risky to invest the money inside the country, they resort to the Hawala system to transfer it to some safe haven. Thus Hawala method is the best suited process for the corrupted political cult to siphon the country’s funds to foreign countries. Most of their much speculated secret Swiss bank accounts are funded by money laundered through the Hawala channels. There are several alarming situations associated with this system as well. In Jammu and Kashmir, India, terrorist groups use this method to fund their detrimental projects. A recent study by the US Treasury Department revealed that the money laundered through Hawala system is the largest source of investment for human or drug trafficking and other ghastly crimes in India and Pakistan.
The much speculated Hawala scam remains to be one of the most upsetting and biggest scams in Indian history. The bribery scandal was worth $18 million and it was revealed in 1996. The amount of payment received by some of the leading politicians in India via the Hawala brokers shocked the country. It was the very first time in the history of Indian politics the open loot executed by the country’s most respected political leaders took the entire country aback. It was also opened in public that a large sum of the money was used to support the Kashmir based militant group Hizbul Mujahideen. The Hawala brokers involved in this scam were the Jain brothers.
Vineet Narain was the eminent journalist who revealed the scam in public. Some politicians accused in the Hawala case,however no significant legal action was taken against the accused leaders. Most of they were acquitted of the charge in ’97 and ’98 as the evidences seemed insufficient for the charges. The role of CBI was highly criticized in this matter.
Unfortunately no significant legal action taken in this case simply proved that no one is bothered about the country’s funds being drained by the political system. The only way to put a stop on such offences is a mass revolution. Since the political leaders are never concerned about such issues, it is the Indian citizens who draw attention to similar issues. The Hawala money is nothing but the hard earned funds of the countrymen and it should be used for the development of the country and not for funding some terrorist organization. The soon Indians become aware of their social rights and responsibilities, the better it is for their future.