Hawala brokers bled India of Rs 100 billion in foreign exchange last year

A B Mahapatra in New Delhi

The 3,000-plus international hawala brokers operating in the Asian region robbed the Indian government of foreign exchange worth Rs 100 billion last year.

According to the Enforcement Directorate, the forex seizure last year was triple that of the previous -- it leaped from Rs 30 to Rs 90 billion -- signifying an alarming rise in the illegal trade.

The business, say ED officials, is monopolised by a group of migrants from India who, mostly operate from countries in the Gulf and South East Asia.

But not all hawala dealers make big killings -- the small-time brokers operate from downmarket areas and are comparatively less mobile. Unlike the big sharks for whom a single operation would bring money in millions, the small ones have to be satisfied with much smaller fruits of labour. Their overseas clients are mostly labour class people whose monthly income is below Rs 5,000 and are, hence, unable to afford the high banking remittance rates required by the official channels.

For instance, the Dubai-India charges are Rs 80 to send Rs 1,000 across. And the delivery period is nearly a month. Besides, there are numerous time-consuming procedures with bank officials to hurdle before the money can be received. Hawala operators, on the other hand, deliver the money within three days.

"Most people wish to avoid the bureaucratic hassles involved in formal forex transactions," said an ED official, "Later, these operators also bribe or threaten their clients into acting as conduits for their other business."

While small operators run other businesses -- like gold transactions -- to supplement their hawala income, the biggies go for drug and arms smuggling. "A major haul of contraband substances in international airports belong to these bosses," said the official, "But we catch only conduits -- the brains always manage to hide behind their puppets."

Last year, Indian customs officers seized 84 gold biscuits worth over Rs 7 million at the Indira Gandhi International airport in New Delhi. But the offenders turned out to be labourers from Rajasthan's Sikkar district who did not know what the wrapped articles given to them by hawala dealers in Sharjah were.

"Once a person is trapped in their network, there is no way of getting out as long as he is there in the same country," the official said, "While earlier the operators used to rely on telephones for their transactions, they use coded fax and electronic mails now."

In March 1997, ED officials seized documents from two persons. These had 'pay 10 metre cloth to P-7' written on it. Metre (thousand) and cloth (rupees) are common code words among hawala operators, the ED official said.

The Indian government is currently pushing through a proposal to convert the Foreign Exchange Regulation Act into Foreign Exchange Management Act. This, finance ministry officials believe, will curtail hawala operations in a massive way.

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