In the Media

UK investigates money transfer system

PUBLISHED July 27, 2006

An informal money transfer system, used by foreign workers around the world, is being probed by Soca, the UK?s FBI-style law enforcement agency, as part of a series of international investigations into drug trafficking networks.

The Hawala system exists outside traditional banking channels, with the transfer of money based on a network of informal dealers known as hawaladars.

While Hawala is used by millions of immigrant workers as a legitimate form of remittance transfer, the system is being increasingly manipulated by organised crime and, in smaller volumes, by international terrorists, say UK officials.

?We have identified as a high-risk area dedicated money-laundering ?controllers? who use the Hawala system to exploit the proceeds from the illicit drugs trade,? said David Armond, head of Soca?s Proceeds of Crime Unit.

?We believe that the people who need to be targeted are the hawaladars who support major drug traffickers,? Mr Armond told the FT.

This month, Soca officials attended a high-level meeting in the United Arab Emirates, a Hawala hub, as part of efforts to strengthen anti-money laundering operations there.

The UAE has stepped up its crackdown on money laundering since its financial system was suspected of financing al-Qaeda in the late 1990s.

Since its official launch this spring, Soca has de-ployed dozens of investigators to Afghanistan and neighbouring countries in an effort to help local authorities track and disrupt the financial operations of international drug syndicates.

Sir Stephen Lander, Soca?s chairman, said the agency was also conducting investigations with a number of foreign jurisdictions into drug trafficking and illegal people smuggling although some of these cases would not be prosecuted in UK courts.

?One of our key building blocks as an organisation is seeing these issues as global problems that require international co-operation and action. It can no longer be a question of simply waiting at the UK border to keep them out,? he said.

The prime minister has invested much political capital in Soca. Tony Blair pledged at its launch that the new agency would ?make life hell? for gangsters, drug traffickers, and fraudsters.

But the Soca chief warned that his agency could be forced to make savings because of tighter spending targets imposed by the Treasury.

With the Home Office promising 8,000 new prison places, and the Treasury insisting that the Home Office expenditure should be frozen in real terms for three consecutive years from 2007-08 through to 2010-11, Soca is facing stiff competition from other departments that are demanding more money.

?There is not going to be a lot of spare money around. This is not growth time for any organisation in the law and order and Home Office space. But we are ambitious as an organisation and if there is any spare cash around we sure as eggs would like some of it,? said Sir Stephen.

He would ask Home Office ministers in the autumn for a ?sizeable chunk? of planned expenditure.

This is over and above the ?416m secured belatedly by Soca for its first operational year. Additional money is needed for new IT systems and the hiring of more financial investigators from the public and private sector.

Sir Stephen has told ministers that significant investment in IT and financial investigators is needed to handle more efficiently the system for reporting suspicious financial transactions, a weapon in the overhaul of the government?s drive against money laundering.

The gaming industry is among the sectors Soca wants to contribute more to the Sars system because of the potential that international gambling has as a medium for laundering.