COMBATING MONEY LAUNDERING A CHALLENGE IN WAR ON TERROR
TARIQ AHMED SAEEDI
July 26 - Aug 1, 2010
HAWALA is not an unheard mode of transferring money across the border and has been playing catch-up with the regulated financial system of money transfer in Pakistan as well as world over since many years, although emergence of modern banking and financial system has reduced the volume of amounts being transmitted through unregistered and unregulated remittance transmitting means. Interior minister Rehman Malik reportedly said in the start of this year that hundi or hawala business was down 80 percent in Pakistan. Contrary to this, foreign exchange dealers who still see this as a biggest threat to legal currency exchange business list the share of hawala near 50 per cent of the total remittances landed in to the country.
Hawala is not a vernacular but a popular international epithet to describe non-banking or non-financial unregistered intermediaries who execute sending cash from one destination to other remote location. American Heritage defines hawala "A system for remitting money... in which a financial obligation between two parties is settled by transferring it to a third party, as when money owed by a debtor to a creditor is paid by a person who owes the debtor money. Hawala transactions are usually based on trust and leave no written record."
It is only now that such system has been widely declared illegal internationally with the rising terrorism and criminal activities being funded by such system uncared of origin of income or its end-use. Post 911's twist caused a rapid change in the financial systems of the world with US watchdogs keeping vigilance on sources of funds available to terrorist organisations. Much to the disappointment of US and other leaders in war on terror, the system is still being operated and harnessed to fund terrorist activities. For example, recently investigators have found a link of funding through illegal channel to the botched bomb attack at New York Time Square. Controlling unnoticed dollars circulations around the world has become a biggest challenge for the US administration.
Is hawala a bane in all its dimensions? Saying yes will perhaps be an overstatement since most of money transacted through hawala or hawaldars is said to have benign purpose of getting benefits from currency difference. Hawala offers many times good exchange rate than open market. Falling rupee value against dollar also shifts customers to hawala means of transfer. Overseas Pakistanis select such system evidently to have good rate on foreign currency. According to foreign exchange dealers, some hawala operators in the market intentionally create pressure on demand of dollar to depreciate rupee value to attract remittors. President Forex Association Malik Bostan reportedly said that shortage of dollar was created because of its smuggling to Afghanistan. This shortage also makes Pak rupee lose its value against dollar despite stable foreign reserves in the country.
People use hawala to disguise sources of incomes as well as get rid of documentation in the banking or non-banking transactions while remitting funds. Government in Pakistan turned its attention to money laundering or concealment of fund source after US tightened its noose around the financing networks in all places of its stakes to make terrorists deprived of funds. Be it Somalia or Pakistan, Afghanistan or Iraq, US intelligence agencies smell weird currency transactions and tracks down their strings to next assault on its interests. How much it has been successful in this attempt is not easy to judge at this moment, nevertheless its alacrity to combat money laundering is manifested in all nations associated with it in any way.
ANTI-MONEY LAUNDERING IN PAKISTAN
President Asif Ali Zardari signed anti-money laundering in to law on March 2010. The Act was passed by the parliament to prevent money laundering and combat financing of terrorism. According to the anti-money laundering law, "whoever commits the offence of money laundering shall be punishable with rigorous imprisonment for a term which shall not be less than one year but may extend to ten years and shall also be liable to fine which may extend to one million rupees and shall also be liable to forfeiture of property involved in the money-laundering. Provided that aforesaid fine may extend to five million rupees in case of a company and every director, officer or employee of the company found guilty under this section shall also be punishable under this section." Federal government has also constituted a special committee known as National Executive Committee to implement the law to overcome money laundering. This committee consists of all bigwigs of different ministries, regulators, and other departmental heads. Ministers of law and justice, interior, foreign affairs besides governor SBP and heads of SECP and NAB are some of the committee members. Its salient tasks would be to review training programmes of financial and non-financial institutions and personnel of other departments to curb financing of terrorism. To report suspicious transactions in financial system and maintain data of such transactions, a financial monitoring unit (FMU) has been established. In close coordination with investigative agencies, the unit would also devise countermeasures to combat money laundering. The regulations make obligatory on the financial institutions to apprise FMU of the transactions fit under the definition of suspicious, or intended to disguise proceeds or having no lawful purpose.
While anti-money laundering law seems to have covered all subtleties required to discourage undocumented transfer of remittances, yet it will be a challenge for the law enforcement agencies to break in to the complex network of unregistered hawaldars with discerning step forward. Hawala is also being used out of desire harmless to state's functions and sometime out of necessity; for instance when banking channel is absent or inefficient. In such cases, penalties defined in the Act will happen to be outrageous. It is an irony, that banks and registered other financial channels have been used in Pakistan as conduits to transmit pseudonym funds. And, big names have come to the fore in money-laundering episode, besides leading foreign exchange companies. The rackets making profits inconsiderate of system's misuse should be brought to justice.