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World-class hawaladar arrested

December 12, 2009

Naresh Jain, the Bernie Madoff of hawala finance, has been arrested.  The Times offers this report, with my snarky comments interspersed:

A man suspected of being one of the world’s most prolific underground financiers has been arrested in Delhi after a year-long international manhunt.

Kudos to India’s Narcotics Control Bureau for making the arrest.

Naresh Jain, 50, who denies any illegal activity, was arrested on Sunday on suspicion of laundering millions of pounds a day through the hawala system for criminals, including members of al-Qaeda and British drug traffickers, according to Indian and British police.

Bravo, Times.  The Financial Times didn’t even mention the Al Qaeda connection.

Using hawala, money can be deposited with a banker in one country and instantly collected from the banker’s associate in another country without any physical or electronic transfer taking place. It depends entirely on trust and remains extremely hard to regulate, despite international efforts.

Hard to “regulate”?  In India, hawala is basically an illegal activity, not just a regulatory matter.

Mr. Jain, a Dubai-based Indian national also known as Naresh Patel, was being tracked by detectives in London, the US, the Netherlands, Italy, Spain and the United Arab Emirates when he was seized by the Indian Narcotics Control Bureau.

“The illegal money transfer systems they use provide the infrastructure to launder cash for organised crime groups whose activities directly impact on the United Kingdom,” Ian Cruxton, the deputy director of Soca, said. “These networks pay no attention to cultural or geographical barriers and launder money for … UK, Pakistani and Turkish nationals based in the UK and mainland Europe involved in drugs trafficking.”

The networks pay no attention “to cultural or geographical barriers”?  Then why do they usually involve Muslims?

Mr. Jain is reported to have emigrated in 1995 to Dubai, where he started a company dealing in steel scrap and food stuffs that became the foundation for his banking operations.

He was arrested in Dubai in April 2007 but fled the country the following year after being released on bail.

The sting allegedly revealed that Mr. Jain was processing about $4 million (£2.5 million) a day and that he used financial markets in New York to launder Italian and Albanian heroin money — mostly through sham commodities trades where he appeared to lose money while, in effect, transferring it to a client.

One note:  by trade, these hawaladars store a great deal of information in their heads rather than in computers or on paper.  Hopefully, the Indians have some all-star interrogators who can extract as many clients’ names and their locations from Jain’s brain as possible.

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2 comments

  1. Great coverage MoneyJihad team, and thanks for linking…

    I am also looking at the coverage given to this issue Indian media for my upcoming article. Yet something interesting which i failed to note before is visible in this article..

    >>The illegal money transfer systems they use provide the infrastructure to launder cash for organised crime groups whose activities directly impact on the **United Kingdom**..

    UK is already well known to be the epicenter for dealers laundering money for ships on behalf of Somalian pirates.. now this is opening a totally new layer of information..


    • In an effort to stay at the center of world banking, UK decision-makers have done everything they could to encourage Islamic banking. Now it’s coming back to bite them in the butt.

      Thank you, Puneet, and let us know when your article is published!



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