The Hindu : From black to white

Online edition of India's National Newspaper
Sunday, Aug 04, 2002

Opinion

Opinion - News Analysis

From black to white

The hawala system thrives on the patronage of those out to launder their money.

THE HAWALA system thrives largely on those out to launder their money. The numerous export-related frauds are good examples.

A common trick is the overvaluation of goods. An exporter gets an importer in another country, usually in the Middle East and now even in South East Asia, to quote a price many times higher than the goods to be exported.

Customs officials, even if they notice, find it difficult to question the value. After all, why should they object if an exporter is bringing in more foreign exchange than what his consignment truly deserves?

But the story is quite different. The importer is compensated for the extra amount by the exporter, who sends the money through hawala channels.

In the process, the exporter has converted black money into white. Also, he profits from the drawback benefits accruing from the Government's many export promotion schemes.

Sometimes, officials say, the exporter even sends out junk for this.

Another variant of the overvaluation method is misclassification of goods.

The Directorate of Revenue Intelligence is investigating a case where a company brought in close to Rs. 1,800 crores by misclassifying a certain petroleum product.

The means rarely used before the Indian economy opened up in the early 1990s are today considered routine by investigators.

What is new are their applications in carrying out serious offences.

In April this year, the DRI initiated proceedings against a Delhi-based firm, NEC Engineers Private Ltd., on charges of shipping out sensitive and prohibited material to Iraq allegedly for its weapon development programme.

The consignments comprised dual use items such as titanium vessels, atomised aluminium powder and centrifugal pumps. The company's general manager and an accused, Rajiv Dhir, to avoid Customs detection is alleged to have declared the goods under different categories.

For instance, atomised aluminium powder had been declared as aluminium powder. The former, DRDO experts testified, is specifically for military purposes.

Just as many traders benefited from the Indo-Russian Rupee-Rouble Trade Agreement by diverting their goods midway to an undisclosed destination, this company too declared its destination as Jordan or Dubai and diverted it to Iraq.

Ten such consignments valued around $ 8 lakhs were sent across between September 1998 and February 2001.

Searches of Ashfaq Ahmed, main accused in the Red Fort shootout, resulted in the recovery of chits and computer files. Nearly Rs. one crore was received in six months through hawala channels.

Some of the codes used by him were — trouser: A code for sending money through telegraphic transfer; tape recorder: Rs. 1 lakh; cassette: Rs. 1,000; India Today: used as a prefix before a digital code needed to get the money from a hawala operator.

Ashfaq had two bank accounts in Srinagar and one in Delhi, in which he received money through routine telegraphic transfers.

Mohammed, who led the attack on Parliament, also had accounts in the country and is said to have received about Rs. 60 lakhs through hawala from one Tariq in Pakistan who is a local commander of the Jaish-e-Mohammed.

Despite an increased usage of regular banking channels, hawala is still the preferred mode of transfer for terrorist outfits. All that is required is to deposit money with a hawala trader who passes on a code which is also known to the recipient.

There is no physical movement of money, just a reference. As most of the links in the chain do not know the purpose for which the money is being sent, it becomes difficult for investigators to trace the entire route.

"At best, we can hope to neutralise the Indian links," admits an official.

Chhaganlal Khattri, who was picked up by the Narcotics Control Bureau two years ago with 4 kg of heroin, revealed the involvement of hawala traders in the narcotics trade.

He was to receive his payment from Soma Bhai Nagin Bhai, a hawala outpost in Chandini Chowk which had advertised itself as a courier company.

Several chits with code numbers were recovered from this place and as in most of the cases, the owner denied any knowledge of the purpose for which the money was received.

For transactions within the country, a variant of the hawala called the "angedia" system is used.

Currency notes are torn in a manner that both halves bear the RBI serial number.

This serves as a code and the recipient produces the other half to collect the money from the other angedia trader.

In all these methods, sources say, the way is usually shown by the white-collar criminal. Nowadays, there are organised frauds committed by reputed firms.

A well-known multinational was recently served a showcause notice by the Directorate of Enforcement for sending out coffee consignments worth Rs. 200 crores under the Rupee-Rouble scheme which were diverted to Helsinki while a Russian front confirmed the receipt in Moscow.

It was an organised, white-collar crime which involved the most "reliable" of banks, numerous accounts and several well-qualified management professionals. — P.D.S.

Printer friendly page
Send this article to Friends by E-Mail

Opinion

Stories in this Section

Grime on the collar

The problem of proof

From black to white

Why Bradford is not Leicester

Bt Cotton: a needless controversy