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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
INFORMAL FUND TRANSFER
SYSTEMS (HAWALA)
PRESENTATION BY :
COMMISSIONER POLICE
DATO’ MOHAMAD FUZI B. HARUN
DIRECTOR , SPECIAL TASK FORCE
(OPERATION AND COUNTER TERRORISM)
ROYAL MALAYSIA POLICE
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
SCOPE
What Are Hawala System And How it operates
Sample of Hawala
Why People Use Hawala
Are Hawala Defying The Anti Money Laundering/Counter Terrorist
Finance (AML/CTF) Regulations
Malaysia’s Experience
How Deep is The Problem
Should There Be A Regulatory Framework For Hawala
Moving Forward
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
WHAT are hawala system and how it operates ?
An alternative remittance channel that exists outside traditional
banking systems.
One definition from Interpol is that hawala is “money transfer
without money movement”. Remittance via a network of hawala
brokers (hawaladers).
Transactions between hawaladers are done without promissory
notes (monetary value) because the system is heavily based on
trust.
The unique feature of the system is that no promissory instruments
are exchanged between the hawaladers.
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
WHAT are hawala system and how it operates ?
The transaction takes place entirely base on trust and honour
system.
System does not depend on the legal enforceability of claims and
operate even in the absence of a legal and juridical environment.
Informal records are produced of individual transactions, and a
running tally amount owed by one broker to another is kept.
Settlements of debts between hawaladers can take a variety of
forms and need not take the form of direct cash transactions, any
kinds of property (gold), instruments (banking product) and
electronic transfer (internet banking).
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
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HAWALADERS IN MALAYSIA
HAWALADERS IN INDONESIA
ILLEGAL WORKER IN MALAYSIA
FAMILY IN INDONESIA
1. CASH GIVEN 7. CASH
GIVEN
2.Call/Fax/Email
3.Remittance Code
4. Remittance
Code
6. Remittance
Code
5. Remittance Code
Sample of Hawala
SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
Why PEOPLE use hawala ?
Paperless & Convenient
- No need to fill in standard remittance application form required by
the normal Financial Institutions.
- Thus this can facilitate illegal workers/foreigners, criminals
or even terrorist to be able to send their money abroad.
Without their identification and avoid detection by the authorities.
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
Why PEOPLE use hawala ?
Fast & efficient.
- In typical hawala system, as contrast to certain normal mainstream
remittance facility, the duration for the flow of fund from remitting
customer in Malaysia to beneficiary abroad range from minimum
few hours to maximum duration of 1 to 2 days.
- Thus it can compete with the normal remittance facility offered by
the banks or remittance service provider.
Cheaper.
- To some illegal foreign workers this medium is the cheapest medium
compared to normal mainstream remittance charges.
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
Are hawala system DEFYING the AML/CTF Regulations ?
Yes;
Paperless
- In another word there is no requirement to fill in the standard
remittance application form as normally required by the normal
Financial Institution
Thus this can facilitate criminal, illegal workers/foreigners or even
terrorist to be able to send their money abroad without the need to
provide their identification and avoid detection by the authorities.
Since it paperless, No Customer Due Diligence (CDD) or Know Your
Customer (KYC) conducted as per requirement by AMLATFA 2001 or
the Sectoral Guideline on the Money Changers.
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
Are hawala system DEFYING the AML/CTF Regulations ?
Audit Trails
- There is no audit trails to tie up the flow of funds with the remitting
customer or even the beneficiary (abroad). This is the great avenue
for the criminal or even terrorist financiers.
This can amplify the massive flow of illegal fund or money-
laundering proceeds or terrorism funds from one country to another
without being caught under the radar of the authorities .
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
MALAYSIA’s Experience
Cash Courier
- Abu Sayyaf Group (Financial Support)
Internet Banking ( Infak)
- Agus Salim
Money Changer
- Bank Negara ( Ops Cuci)
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
How DEEP is the problem ?
Under Control
Most of the domestic foreign workers or illegal immigrants use this
channel to send money back to their home country or anywhere.
Majority of criminals resorted to this channel to move their fund
abroad (Forex, Money Changer, Cash Courier, Malaysian Gambler,
Illegal Money Lender, Junket)
Cases reported by the investigation on money-changers from the
Special Task Force .
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
LAWS OF MALAYSIA Act 577
Money-Changing Act 1998
Measure to deal with hawala
As incorporated in Section 30(1) of Money Changing Act 1998.
(i.e. before the coming of new Act: Money Service Business Bills 2011 )
No remittance or transfer
of funds 30. (1) no licensee, in Malaysia, shall –
a) Remit or transfer funds outside Malaysia; or
b) Do any act that involves, is associated with, or is preparatory to,
remitting or transferring funds outside Malaysia, whether on its
own behalf or on behalf of a third party.
(2) Any licensee who contravenes subsection (1) shall be guilty of
an offence and shall on conviction be liable to a fine not
exceeding one hundred thousand ringgit.
(3) Notwithstanding subsection (1), a licensee, on its own behalf,
may remit or transfer funds outside Malaysia through an
authorised dealer.
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
Should there be a regulatory framework for hawala ?
Yes. Latest initiatives is the passing of the following law:-
MONEY SERVICES BUSINESS BILL 2011
This Bill (“the proposed Act”) seeks to govern the activities of money-changing
business, remittance business and wholesale currency business, which is being
modernised and consolidated into a single industry known as the “money
services business” industry. The proposed Act covers the licensing, regulation
and supervision of licensees and their agent to ensure that the industry shall
comprise of dynamic, competent and professional players. Apart from seeking to
impose governance, operational and control requirements for the sound conduct
of their business, the proposed Act also seeks to strengthen the prudential and
supervisory framework in the money services business industry to curb illegal
activities, money laundering and terrorism financial. This is pertinent for the
maintenance of the integrity of the Malaysian financial system.
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
NOW: What is REMITTANCE – in light of Section 2 of the newly
passed Money Service Business Bills 2011
“Remittance Business” means the business of transferring funds or
facilitating the transfer of funds, whether in any form or by any means
or whether there is any movement of funds or not, on behalf of an
originator person in or outside Malaysia, with a view to making the
funds available to a beneficiary person in or outside Malaysia and the
originator person and the beneficiary person may be the same person,
but excludes such other businesses, activities, system or arrangements
as the Bank may prescribe;
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
Prohibition from carrying on money services business
4. (1) No person shall carry on money services business without a
licence issued under this Act.
(2) Subsection (1) shall not apply to a money services business
agent.
(3) The Bank may prescribe different classes, categories or
description of licence in respect of money services business.
(4) Any person who contravenes subsection (1) commits an offence
and shall, on conviction, be liable to a fine not exceeding five
million ringgit or to imprisonment for a term not exceeding ten
years or to both.
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
Moving Forward
How Royal Malaysia Police can assist ?
RMP to combat hawala via the intelligence/networking by the
other law enforcement agency (LEA).
- RMP cannot work silos.
- Domestic/foreign counterpart.
Joint investigation
- Especially when hawala involved flow of fund from predicate
offences under the RMP’s jurisdiction (i.e. drug money, ransom
from kidnapping or extortion, human trafficking activity, terrorist
financing etc.) and also related to BNM’s licensee (i.e. Money
Changers ) .
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SPECIAL TASK FORCE ROYAL MALAYSIA POLICE
Moving Forward
Exchange of information between RMP and other LEA from time to
time on the flow of fund involving hawala technique.
Ongoing collaboration between RMP and other LEA in information to
monitor the latest modus operandi for hawala in Malaysia.
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THANK YOU
Q & A SESSION
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