 India has emerged as a promising destination

for financial & business activities.

 But its system of informal cross border
money flows makes India vulnerable to
money laundering.
 As per IMF, aggregate money laundering in
the world may be around 2-3% of world GDP
making it around $500 billion or $1.5 trillion
 Hawala fund transfer may be around 30 to
40% of formal market in India.
 Banks are at the highest risk of money
laundering.
 Broking Firms, other investment firm are also
witnessing rise in money laundering
activities. They have attracted more than 25%
of money laundering activities.
 Thus there is a need for continuous
improvement in the area of anti money
laundering
 Hawala is an Arabic word which is mainly
related to money transfer mechanism existed
in south Asia and middle east.
 This system purely works on trust.
 Culture, history, lack of banking facilities are
the reasons behind Hawala system.
 Hawala or similar type of fund transfer
system is existed all over the world.
 Highly successful
Based on Cash - in & where large numbers Run other business
cash - out system of expatriate along with Hawala
workers live.

Works on limited
Can be used for
customer
illegitimate activities.
information.
 Traditional Hawala Criminal Hawala
Mixed Hawala System
System System

• One of the oldest. • They are also used • This hawala system
• Deals in Low value for legitimate specifically designed
transaction purpose but can be to do illegitimate
• Minimum risk of used for illegitimate activities
money laundering. activities. • This system is
• Existed due to lack of • This happens in case created by criminals
banking facilities, of tax evasion or to evade taxes &
cultural familiarity. currency control & corruption.
avoid sanctions.
• Originally they are
not criminal network
25

20

15

10 20
18 17
5 11 10 10 11

0
14 13
12
12
10
10

8 7

6 No. Of Countries

0
Travel Mobile Pawn Shops Other
Agency Phones Services
 44%
YES
NO
56%
 86%
90%

80%

70%

60%

50%

40%

30%

20% 14%

10%

0%
YES NO
100% 100%
93%
83% 86%
79%
120%

100%

80%

60%
100% 100%
91% 91%
40% 82%
73%

20%

0%
Failure to Due STR Record Training Compliance
Register Diligence Keeping & Internal
Control
Administrative
Fine
28%
Imprisonment
37%

Criminal Fine
35%
 Criminal Hawala System is one of the source
of money laundering.
 Criminal Hawala is highly unregulated and
mostly run by criminals to evade taxes and
other reasons.
 There are four person involves in Criminal
Hawala system.
 They are 1) Money Broker 2 ) Collector
3)co-ordinator 4 ) Transmitter
Money Broker
• Trusted Person who arranges
street money and make sure
similar value to be arranged at
desired destination to the
desired person
Collector
• Act as per broker instruction.
Collect money from sender and
dispose to desired location.
Transmitter
The person who receives and
dispatches money to the control
of the controller
Co-ordinator
• Acts as an intermediary for
money laundering
 Kerala has one of the largest numbers of
workers in middle east and as per the
directorate of revenue intelligence & Kerala
police, Hawala business between Gulf &
Kerala is estimated to be around Rs.40,000/-
crore.
 It got some setback after currency
demonetization, as high denominations notes
became useless in a single day.
 But as per Indiatoday Report dated 6th April
2017, Hawala business is thriving again.
 Hawala is banned by Foreign Exchange
Management Act (FEMA),2000 & Prevention
Of Money Laundering Act (PMLA), 2002
 Hawala operator in Kerala finds money
laundering business more profitable. They
consider money laundering as a safest
business when it comes to risk factor.
 Many operators in Kerala specialized in
Money Laundering through Hawala trading.
 Hawala operators charge 20% fee to launder
black money.
 Many businessmen, politicians, and
bureaucrats are their clients. They create
companies in the name of family members in
Dubai to launder Money.
 Many take advantage of Dubai Free Trade
Zone where promoters don’t need to show
the source of income to run company.
 Hawala operator helps his Indian clients get a
business visa and float a trading company or
join one of his company as a partner.
 Clients stays more than 181 days which is a
condition to be regarded as a NRI
 And thus his black money turned into white
and transferred to his ‘NRI’ account as tax
free rupees.
 Money laundering, though illegal in India, is
running parallel banking system.
 Kerala is one of the example of thriving
Money Laundering business through Hawala.
 Some of the Hawala Operator’s money
laundering strategies were unaffected or
temporarily affected by demonetization.
 Hawala can raise issues of FCIN i.e. Fake
Indian Currency Notes which may badly affect
India.