Rising concern over illegal money transfers

By Tim Leonard, The Sun

Hawala or illegal money remittance is set to become the largest illegal trade in the country, overtaking narcotics, illegal wildlife trade and other criminal activities.

A senior Bank Negara Malaysia (BNM) official disclosed that the hawala system is posing a serious concern in the financial market and many licensed money changers were working in cohorts with their foreign counterparts.

The amounts transferred in and out of the country in this way run into several hundreds of million ringgit annually.

“Although no official figures are available, the amount involved could even surpass RM1 billion annually, and this is a very serious concern for the authorities," he said.

The official said hawala is growing so rapidly that serious action must be taken immediately to stop its exponential growth.

“Despite BNM revoking the licences of 41 moneychangers under the Money-Changing Act since 2009, there seems to be no clear solution to this problem."

The hawala system in Malaysia gained media prominence last year when allegations surfaced that a senior Negri Sembilan politician had transferred out RM10 million to London through a moneychanger in 2008.

Reports also emerged that a growing number of politicians and wealthy individuals had used the system to transfer money to various parts of the world.

Following the reports, Bank Negara went after moneychangers offering such services. Those found to have contravened provisions of the Money Changers Act, including Section 30 which prohibits the transfer of funds outside Malaysia, whether on their own behalf or for third parties, had their licences revoked.

Over the past few weeks, charges have been brought against at least three companies and their directors for money laundering involving millions of ringgit.

It was also reported that the single largest amount detected via hawala was over RM20 million by a property developer.

But more than a year on, it appears the central bank is losing its battle with hawaladars or hawala dealers.

There are currently 875 licensed moneychangers in the country.

theSun learnt that BNM is also considering serious measures to curb illegal money transfers by imposing a new set of guidelines and stepping up surveillance and investigations.

Hawala is essentially an underground banking system of transferring cash out of the country based on trust among moneychangers, whereby money given to one outlet in a country would be paid out by another in the destination country.

The transaction is conducted with a just telephone call -- much cheaper and faster than going through conventional banks -- and is practically untraceable.

The United Nations has pinpointed the hawala system as a potential means of financing terrorism, as money can be made available internationally without actually moving it or leaving a record of the transaction.