In Pakistan, “hawala hundi” refers to informal and often illegal methods of transferring money or remittances across borders without going through traditional banking channels. It is essentially an underground or parallel money transfer system that operates outside the formal financial sector. Here’s how it typically works:
- Sender: A person in Pakistan who wants to send money to someone abroad approaches a hawala dealer.
- Hawala Dealer: The hawala dealer takes the sender’s money in Pakistan, along with a fee for the service.
- Code or Password: The hawala dealer contacts a counterpart or associate in the recipient’s country, providing a code or password.
- Recipient: The recipient in the foreign country approaches the hawala dealer or associate there, provides the code or password, and receives the equivalent amount in the local currency.
The key characteristic of hawala hundi is that it relies heavily on trust and informal networks. It operates largely on the basis of personal relationships and reputation within the community. As a result, transactions are often quick and efficient, and they may not leave a paper trail like formal banking transactions do.
However, because hawala hundi operates outside the regulated financial system, it can be susceptible to misuse for illegal activities such as money laundering, tax evasion, and financing of criminal or terrorist organizations. Therefore, authorities in Pakistan and around the world often seek to regulate and monitor hawala transactions to prevent illicit activities and ensure financial transparency.
FIA Action Against Hawala Hundi Business
In Karachi, the Federal Investigation Agency (FIA) is taking action against individuals engaged in the hawala hundi business abroad, as reported on Sunday. Officials have disclosed that the FIA plans to gather information from the mobile phones of individuals arrested for hawala hundi-related offenses. Additionally, the Mutual Legal Assistance Wing of the investigation agency will collaborate with Interpol to establish communication with foreign authorities, as outlined by officials.
The FIA plans to request information about the people involved in the hawala business, such as their names, bank details, and other data, from authorities in other countries.
Last Thursday, the FIA reported the arrest of five individuals involved in the hawala hundi business in Karachi. According to the FIA spokesperson, during the initial arrest, authorities found $35,000 USD in possession of the five suspects. These individuals were identified as Zaid Khan, Muhammad Irfan, Furqan Saleem, Muhammad Raza, and Osama.
However, the suspects could not provide satisfactory explanations to the authorities regarding the sale and purchase of $23,000 USD.
During the investigation, numerous messages related to foreign currency, including Hawala transactions, were discovered on the mobile phones of the accused.
Following the registration of a case against the arrested men under the Foreign Exchange Regulation Act, the FIA initiated further legal proceedings.