Hawala banking: punishable in Belgium?
Recently, some headlines appeared in both the Belgian and Dutch press: "Seven years in prison for 'underworld banker' Thanas B," "Rotterdam man (47) suspected of underground banking with over 45 million euros"and "Nearly 400,000 euros seized at international day of action against cash smuggling".
The phenomenon of Hawala banking is an age-old phenomenon that has received more media coverage as "underground banking" after the SKY ECC crackdown. What exactly does this form of banking entail and is it punishable in Belgium?
Hawala: what's in a name?
The word Hawala comes from Arabic and means transfer or trust. It is a trust-based system that originated in Asia and the Middle East (8th century). It is an informal system used for international money transfers, especially in regions where mainstream banking is less prominent, without effectively moving funds across country borders.
There is anonymity as there is no requirement of identity documents, bank accounts and/or contracts. Consequently, the system is low-threshold and relatively inexpensive.
Suppose you are in Belgium and want to quickly send money to your family in China, but you are a (labor) migrant without residence documents. It is difficult for you to use a regular financial service provider (such as Western Union, for example). You can turn to a "hawaladar" or "banker" who has contacts in China. When you hand over the money in Belgium, the 'banker' will give you a code or token that you can send to your family member. Your relative in China can also contact a banker since this system is spread all over the world. All they have to do is show the code they received from you to the banker in China and they can receive the funds you deposited in Belgium. No physical money left across borders to China.
After cracking encrypted communication channels such as Encro and SKY ECC, the police were able to establish that this system is also used to finance criminal activities such as international drug trafficking. Thanks to this system, criminal money can easily (provided a commission is paid to the 'broker' or intermediary) reach the other side of the world without leaving traces and without the funds physically crossing borders. In this situation one then speaks of 'underground banking' since one does not want the judicial/police services to know about these international transfers of criminal money.
Is this system legal in Belgium?
Hawala banking is illegal in Belgium, even if no criminal money is involved, as only financial institutions with an accreditation/license from the NBB or FSMA are allowed to provide financial services.
'Underground banking' involves funds with a criminal origin. These transactions can be considered acts of money laundering and are, of course, punishable.
If you have any questions regarding this topic, do not hesitate to contact the experts at Bannister Lawyers by phone (03 369 28 00) or by e-mail (info@bannister.be).
