‘Tax havens protecting Hawala operators’

Last Updated: Sunday, August 29, 2010 - 11:15

New Delhi: Indian efforts to trace Hawala operators involved in money laundering and terror financing are facing hurdles due to non-cooperation of many countries where these racketeers operate, according to a global task force.

The unhelpful countries include tax havens like Cayman Islands, Bermuda, Bahamas and Switzerland. To get around the hurdles being created by these countries India is trying to strengthen its tax treaties with them.

"The authorities (Indian) have indicated that part of their frustration in trying to tackle this (Hawala) problem is the lack of co-operation that they receive from some countries where the transfers originate," said the multi-national Financial Action Task Force (FATF), an inter-governmental organisation founded in 1989 by the G7 (group of seven
industrialised nations) to develop policies to combat money
laundering and terrorist financing.

"This includes countries where Hawala activities are not licensed or regulated effectively and countries where Hawala activities are legal. To some extent, the move to suppress the activity in India has also been hampered by the foreign exchange liberalisation programme," the top body said.

The global task force said this in its full report that it prepared after it met top Indian officials from the Finance Ministry and agencies like the Enforcement Directorate (ED), the Income-Tax department and Financial Intelligence Unit.

Hawala is an illegal mode of money transfer and it is regulated in India under the provisions of the Foreign Exchange Management Act (FEMA).

According to government data on Hawala transactions, almost Rs 90 crore was laundered during the last year (upto October 2010) while the corresponding figures for 2008-09 was Rs 932 crore, for 2007-08 Rs 112 crore and during 2006-07 it was Rs 110 crore.
The task force came to India last year to assess its performance parameters in implementing anti-money laundering, counter-terror financing measures and laws like the FEMA before including it into the top body recently.

The task force, however, praised the Enforcement Directorate`s efforts to tackle these cases.

"It (ED) inherited some 15,000 cases of criminal activity under the FERA, and had managed to clear about 12,000 cases by end-2009, but this remains the primary focus of its work on Hawala.

"A much more limited number of cases have been referred to it under the FEMA. Eleven persons have been found to be repeat offenders under FEMA to date," the report said.


First Published: Sunday, August 29, 2010 - 11:15

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