Hawaladar’s Lament

from Priceonomics

Hawaladar is a person who provides money services (hawala) to criminals. He is part of the criminal part of the shadow banking system. Shadow banking system is the banking services offered by non-banks. For example, a hedge fund could provide a loan to a company, which would be a shadow banking activity. Halawadar does something similar.

A Hawaladar is a person who moves money from one place to another using his network of contacts he’s developed usually from traditional import-export activity. So, for example, if a criminal in London wanted to payoff another criminal in New York in the amount of $10,000, the criminal could go to a Hawaladar in London, give the Hawaladar $10,000. The Hawaladar would call up an associate in New York and ask him to pay the criminal in New York $10,000. The Hawaladar in London would settle up with the associate in New York at a later time. The settlement usually is underpricing or overpricing of the goods being traded. The Hawaladar and the associate have both charged money for the service, of course, which the criminal in London is usually responsible for. And, in order for all of this to work, the associate in New York must trust the Hawaladar in London to settle up.

Nowadays, are Hawaladars really doing any trading? They are just a money service business.

The Hawaladar has been facing more competition over the past decade. Now, the London criminal could buy a prepaid debit card with cash at any store and then send that to the criminal. It does not require any intermediaries. The cost of buying a prepaid debit card is next to nothing. I think I could go to the corner store on my block and get one for about $5 and load thousands of dollars on it.

There are also other ways as well. People who do not have international trade businesses can get in on the Hawaladar game. I could pay off someone on behalf of a criminal using my PayPal account. I could use my Google Wallet. I could use my ApplePay. I could use Square, the payment service. I could use Venmo. I could use any store with a credit machine merchant account and pay them on my credit card and the store could pay off the criminal. It will just look like I paid for a product or service. I could even use Bitcoin.

The increasingly greater number of easy payment/transfer options are making it possible for criminal activity to be paid without the use of a Hawaladar.


What do you think was the weapon that was used to kill churchgoers in Charleston, South Carolina, confederate flag or gun?


About the Author: M. C. Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. 


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FinCEN sets enhanced due diligence against high risk countries

FinCEN is increasing its effort to fight money laundering and terrorist financing. It is doing it by setting higher risk-based due diligence requirements for financial service institutions. The requirements meet the standards set by FATF.

FinCEN also  provided a list of countries that these requirements will be applied to, though if the risk-based approach results in similarly high risk issues in other countries, financial institutions are required to use these due diligence measures as well. The countries are as follows:

http://www.undervaluedequity.com/Country-Risk-Ranking-System-How-I-Assess-My-Stock's-Country-Risk.html
image from Jeroen Snoeks
Sanctioned countries:

  • Iran
  • Democratic People’s Republic of Korea (DPRK)

subject to FinCEN enhanced due diligence requirements:

  • Algeria
  • Ecuador
  • Myanmar

Improving Global AML/CFT Compliance: on-going process (also, subject to FinCEN enhanced due diligence):

  • Afghanistan
  • Angola
  • Guyana
  • Indonesia
  • Iraq
  • Lao PDR
  • Panama
  • Papua New Guinea
  • Sudan
  • Syria
  • Yemen

Jurisdictions not making sufficient progress (also, subject to FinCEN enhanced due diligence):

  • Uganda

Jurisdictions no longer subject to listing and monitoring (FinCEN recommends that financial institutions take the FATF’s decisions and the reasons behind the delisting into consideration when assessing risk):

  • Albania
  • Cambodia
  • Kuwait
  • Namibia
  • Nicaragua
  • Pakistan
  • Zimbabwe

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.


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FATF Means Financial Action Task Force

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. – FATF

FATF is housed at the Organization Economic Co-operation and Development (OECD) in Paris, France. It works with the G-7 world leaders, G-20 finance ministers to make policy and enforcement recommendations regarding anti-money laundering, anti-bribery, anti-corruption, anti-terrorist financing and anti-piracy. It is part thinktank and part NGO.

FATF has a membership status for each country. There are thirty five member nations and the rest are either observing the guidelines and recommendations or not actively doing so. FATF also has a Blacklist, a list of banned nations. The usual suspects are listed: Iran, North Korea, etc.

The Treasury represents the United States at the FATF. The Financial Crimes Enforcement Network (FinCEN) is the primary contact for guidance.


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.