New Delhi, Nov. 22: Along with al Qaida, hawala is now under international attack and could be forced to shed its most attractive quality: secrecy and anonymity.
Under pressure from the US, European countries and India, G-20 finance ministers plan to chalk out a way to crack down on hawala — the informal Islamic global money transfer system — that is known to have channelled illicit funds to terror groups.
India, which in the past was not too enthusiastic about hunting down hawala operators, now wants to target the well-entrenched parallel banking system. Intelligence agencies have found evidence that it was used by Kashmiri separatists and Mumbai-based mafia groups to access funds from Pakistani agencies.
A dinner meeting for G-20 finance ministers tomorrow, called to discuss the global economic situation and ways to tackle future financial crises, will focus on how to block or place checks on these channels which transmit up to $100 billion in funds annually.
In addition to the US and India, the G-20 includes France, Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the UK, and the European Union.
The European countries and the US have long been wary of hawala. US treasury secretary Paul O’Neill is now insisting that G-20 member states and eventually others bring in harsh penalties for unregistered money remitters using hawala channels.
This means that all nations will have to agree to a system of registering and licensing hawala operators. Top finance ministry officials admitted that once the G-20 ministers formally agree to the US proposals, Indian money laundering and banking laws will have to be rewritten, forcing hawala operators out into the open and placing harsh criminal liabilities on those who remain underground.
Pakistan, which is not part of the G-20 but will be pressured to follow its decisions, is resisting the move arguing that most hawala users are law-abiding citizens who rely on it as a less expensive alternative to bank transfers.
Other developing nations, including sections in the Indian administration, are squeamish about this as it will block ways to access political and business kickbacks and hush monies parked abroad.
Recent Indian foreign exchange and money laundering laws have been soft on hawala operations. Attempts by Opposition legislators to raise the issue of hawala channels and their role in stock market scams in Parliament have been repeatedly downplayed by the government.
US officials say some features that make hawala attractive for legitimate users — efficiency, secrecy and reach — also make it attractive for transferring terrorist and drug money. Hence, they want all countries, especially Asian nations, to cooperate in bringing hawala operators overground.
Already at official level meetings held today, G-20 deputies agreed to share intelligence to tackle the menace. Analysts estimate that hawala operations in the sub-continent are worth Rs 20,000 crore a year.