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Eur J Crim Policy Res (2015) 21:257274 DOI 10.1007/s10610-014-9238-6
Melvin Soudjin
Published online: 21 March 2014# Springer Science+Business Media Dordrecht 2014
Abstract Hawaladars, like employees from regular financial institutions, can come into contact with criminal money. The important question is: How do they deal with those situations? Regular financial institutions have introduced all manner of due diligence to lessen such risks and comply with anti-money-laundering regulations. However, it is less clear what precautions hawaladars have taken. If they knowingly handle criminal proceeds, they are guilty of money-laundering offences. If they unknowingly handle criminal proceeds, it becomes important to increase their awareness about such possibilities. To make better informed statements about any involvement of hawaladars in the transfer of criminal money, for this article, police files were studied in which hawaladars facilitated criminal clients. This results in two outcomes: First, seven red flags regarding transactions involving criminal clients were identified. These are subjective indicators a hawaladar could use to identify criminal transactions. Second, with these red flags in hand, it can be determined whether hawaladars in police files could reasonably be found guilty of money laundering. Ultimately, these results could contribute to identifying the possibilities and impossibilities of formal financial supervision of the hawala sector.
Keywords Money laundering . Hawala . Proceeds of crime . Red flags
Introduction
Systems for transferring funds through irregular financial institutions are usually referred to as underground banking, Informal Value Transfer Systems (IVTS), or hawala. The latter term is especially used in relationship to Indian, Afghani, and Pakistani communities. Persons offering hawala services, hawaladars, fulfil an important function in migrant communities according to specialist literature (Ballard 2003; de Goede 2003; Jost and Sandhu 2000; Maimbo 2003; Munshani 2005; Passas 1999). The services provided by hawaladars to migrants for quickly and cheaply remitting part of their monthly incomes to remote areas are said to be superior to those offered by regular financial institutions. The explanation for this is that hawaladars make use of relatives, acquaintances, or other contacts within their ethnic community. Verbal
M. Soudjin (*)
Amsterdam, The Netherlandse-mail: [email protected]
Hawala and Money Laundering: Potential Use of Red Flags for Persons Offering Hawala Services
258 M. Soudjin
promises are reportedly a sufficient basis for a transaction to go ahead. Furthermore, hawaladars save...