Some hawala gangs make more profit than is earned from smuggling gold. Their business is to funnel hawala money from Saudi Arabia to different parts of the world.
A Malayali gang in Dubai conducts business worth Rs 500 crore in hawala and reverses hawala in one day.
A small hawala trader in Kozhikode said he was canceling hawala deals worth Rs 1 crore per day.
(Read previous articles in this series: Part 1, Part 2 and Part 3)
It is not easy to send large sums directly through official channels, including banks in Saudi Arabia.
More than one document is needed to send Saudi Riyal, which equals Rs 1 lakh. The measures taken in the context of the fight against the financing of terrorist organizations are also strict. Hawala has more takers under these circumstances.
Hawala and gold smuggling are linked in an inseparable chain. Some people manage both at the same time. Mr. M, who accompanied me to the Gold Souk, is one of these players. Players like him buy gold using the money they get from hawala transactions and smuggle it into Kerala. Then they sell this gold and distribute the hawala money back home. There are people who sell gold in Mumbai, Bengaluru, Chennai or Coimbatore and take that money in a car to Kerala.
Millions of rupees change hands at hawala operators’ small offices in Deira and Gold Souk in seconds. Hawala rates change in tandem with changes in official rates and gold prices. There are Malayali gangs in several parts of the world who are able to provide money in whatever currency you want the moment the Saudi Riyal is handed over to the hawala agent in Saudi Arabia. The Riyal collected in Saudi Arabia is smuggled into Dubai mainly in two ways. One method is to bring currency in vehicles to Dubai and change it through money changers. There is no legal impediment to this in Dubai. The second is to influence some Saudi bank managers and send large sums to Dubai through the bank account itself. The advantage of the method is that the amount can be withdrawn in dirham itself in Dubai.
Hawala, the ‘profit’ channel
If a hawala agent based in Dubai does business from one lakh Saudi riyal, he can make a profit of 2500 UAE dirhams. If the exchange is made according to the official exchange rate, one will get 97,800 UAE dirhams for one lakh Saudi riyal. If done through a hawala agent, a person in Dubai will receive 95,300 dirhams. Agents will make this amount available in any country in any currency chosen by the client. When comparing with the official rate, hawala customers suffer a lot of losses. But then they ask what other mechanism can quickly transfer money to any part of the world without the need for documents. Moreover, those who make money by engaging in suspicious activities are often unaware of these losses.
People going the hawala route might make temporary gains, but once taken, things won’t be easy for all parties involved in the illegal money transfer. Agencies investigating anti-national activities would strictly monitor all dealings of the person in question and even his or her relatives. Indeed, investigative teams suspect that huge sums of money collected through the hawala channel are being diverted for anti-national activities.
Reverse hawala rate
If a person sends money from Kerala to Dubai, they will receive 4,606 UAE dirhams for Rs one lakh, according to the official exchange rate. But they face several difficulties. Since the money is officially registered, it is difficult to use the amount for illegal purposes. In addition, individuals encounter many obstacles to send considerable sums to foreign countries. No documents are required to send money via reverse hawala, although the exchange rate is lower than the official rate.
If one uses the hawala rate in Kerala, he has to get 4,420 dirhams in Dubai by handing over Rs one lakh to an agent in Kerala. But anyone outside the hawala or gold smuggling chain would only receive 4,370 dirhams. Mainly those who have earned black money through illegal means opt for reverse hawala to quickly transfer money abroad. Customers should be prepared to pay higher fees if they want to send money urgently in an emergency bypassing official systems.
Even wholesale gold traders use this term legally in Dubai: political gold. This is gold owned by the rulers of some African countries with gold mines. Many wholesalers deal with it. Businessmen from foreign countries, including India, run gold mining businesses by making certain leaders of African countries or their close relatives business partners. Many of these companies are legal. However, there are many illegal ones, which individuals have unearthed completely unscientifically on land that belongs to them. The gold thus purchased is transported to foreign countries through certain wholesalers and transformed into investments. A mine owner who requested anonymity has revealed he handled 2,500kg of political gold belonging to politicians and civil servants.
Mirror-to-mirror relationships of politicians
According to the revelations of a key link in the wholesale gold business based in Dubai, some political leaders in Kerala, among others, are investing black money in gold trafficking through Benamis.
This they do via Africa. On one occasion, black money from Kerala came to him in the form of dollars while he was in an African country. The businessman who refuses to reveal his identity says: “The money is received through hawala agents based in Bengaluru, Mumbai and Delhi. They refer to this illegal process as a mirror-to-mirror transaction. The money will be provided in dollars in African countries at the same time the amount is handed over to the agent in Mumbai. There are many small-scale illegal gold mines in African countries. Since they are unlicensed, gold obtained from them cannot be traded legally. This gold is purchased using hawala money. The gold will be sent to Dubai-based companies set up in Benamis’ name. These companies purify the gold before selling it or smuggling it into India. Wholesalers will consider every detail of customers. If the money is generated through criminal activities, it may result in legal messes later on. The review is done to avoid such scenarios. They will only have a maximum of four or five deals with a sole enterprise of the Benamis.
The latter would then have registered a new company. This is to evade arrest and destroy any evidence in the event of an investigation.
(This is part four of the series on smuggling gold)