Terror groups using hawala for fund transfer into India: FATF

India has seen "quite a few cases" of hawala funds coming in from abroad for terrorist organisations, while such cross-border fund transfers are also taking place for tax frauds, global inter-governmental body FATF said today.

 

In a report on the role of hawala and other similar service providers in money laundering and terrorist financing, FATF (Financial Action Task Force) said that "only a few countries like India mentioned that there have been quite a few cases where the funds from abroad by the terrorist organizations were received in the country through HOSSPs."

 

"Many countries consider HOSSPs (Hawala and Other Similar Service Providers) as high vulnerability for Terror Financing but have very few domestic cases to support the statement," said FATF, of which India is a key member.

 

FATF, which has 34 member jurisdictions, develops policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction.

 

It conducted a survey among countries and asked them whether hawala route was being used for terror funding.

 

According to the grouping, a distinct form of criminal remittance network has been reported as operating internationally and servicing the needs of criminal organisations.

 

"These criminal HOSSPs appear to exist predominately to serve the criminal needs. In Europe and Australia, they are focussed on the collection of cash and transfer of value across borders, whilst in India or Pakistan they may be focussed on capital flight, exchange control violations or tax fraud," it added.

 

The 72-page report has incidentally given many examples of Hawala transactions with links to India, including those related to fund transfers for terror financing.

 

Hawalas and other similar service providers arrange for transfer and receipt of funds, through non-bank settlement methods.

 

The report said there are several reasons why HOSSPs continue to pose a money laundering and terrorist financing vulnerability.

 

"These include a lack of supervisory will or resources; settlement across multiple jurisdictions through value or cash outside of the banking system in some cases; the use of businesses that are not regulated financial institutions...," it said.

 

While the settlement through value or trade that masks the individual fund transfers is a source of vulnerability, the most significant reason for concern is lack of supervisory resources and commitment to effective regulation," the report said.