Money-laundering, financing extremism through the „Hawala banking system“

Image: Murad Sezer / Reuters

On May 28 two years ago, shortly after midnight, the Syrian A. is sitting in a car. He and his German business partner T. drove to a meeting in the Netherlands and picked up cash at a motorway service area: around 286,000 euros, mostly 50 euro bills.

The men drove on the German motorway A 61. The German T. is at the wheel, A. next to him. Shortly after crossing the German border, T.’s eyes close from tiredness. He loses control of the car, the car rolls over several times and finally comes to a standstill. The men hardly got any injuries, they climb out of the wreck. But they know that things are getting tight now, the police will be arriving soon.

So A. unscrews the license plates. He takes the registration papers out of the glove compartment and throws them both into a laundry basket, which he tucks under his arm. He grabs the cloth bag with the money, then the men run away, but at a gas station they are caught by German police officers.

A. has the bills almost everywhere, in a cloth bag, in the laundry basket and in his trouser pocket. The police ask where the money comes from, in German, in English. A. does not understand the police officers, or doesn’t want to understand.

A. doesn’t have a job, but has nine bank accounts. It quickly becomes clear that this is about more than money laundering. It’s about a whole bank, it seems. Except that it’s not called Deutsche Bank or Sparkasse, but A. is the bank.

For the investigators, he is the mastermind of a shadow economy called hawala banking. It is a self-organized, informal financial cycle. Some refer to it as an underground payment system.

The method works in two ways: Anyone who wants to send money from Germany to Syria goes to a deposit office in Europe. Often these are kiosks, jewelers or other retailers. There you hand over the money in cash. There is also a place in Syria, for example in Aleppo, that pays the amount to the recipient after they have been informed about the transaction by cell phone. Money can go anywhere in the world in just a few seconds – without an account, without registration. Everyone who organizes this money transfer gets commissions.

The EU tax authorities assume that around 200 billion US dollars flow around the world every year with Hawala. The method is particularly popular among migrants in Europe because it allows them to quickly send money to their relatives back home. On the one hand. On the other hand, there are criminals who use it to launder their earnings from undeclared work and drug deals, scammers who hide their proceeds from grandchildren’s trick deals. There are refugees who use this method to pay smugglers, Salafists who use it to finance terrorists in the Middle East. The path of the money cannot be traced so precisely, which in most cases is the point of the matter.

A. is said to have done most of the business via WhatsApp. A note from the investigators speaks of a chat with more than 300 participants. It was said to be a »hawala exchange«. The users came from dozens of countries and placed and accepted orders in Germany, Turkey, Syria, Iraq or Libya.

In the chats it sounded like this: “We need 14,000 euros in Zurich, who wants to take over?” „Guys, we have 15,000 in Chemnitz, Dresden or Plauen, delivery in Istanbul.“ “We have 3,000,000 rupees in India, we want them in Saudi Arabia.” “I need $2000 in Idlib.”

In October 2021, A. was arrested in a raid and has been in custody since then. Between August 2018 and August 2021 he is said to have collected around 63 million euros. That’s what the warrant says, along with a catalog of charges: membership in a criminal organization, fraud, tax evasion, incitement to aggravated robbery, aggravated assault and assault.

It is possible that A. also financed terrorists, perhaps terrorists imprisoned in the Middle East were bought out with the money from his hawala transfers. Investigators say they are currently following such clues. According to security circles, it was “not just about making money” for him, A. was “also motivated by ideological reasons”.

A. was born in the Syrian city of Idlib. He earned a degree in Islamic Studies from the University of Beirut. In October 2015 he came to Germany as a refugee. He ended up in a refugee camp in a town between Aachen and Duesseldorf and later applied for asylum. In autumn 2016 he received a residence permit, later he brought his wife and three children to Germany.

When he was not yet in prison, A. sometimes spent the night in a neighboring town with his “second wife according to the Islamic rite.” That’s what it says in the investigation file. In September 2016, a man from Syria testified against him at a police station, the two met in a refugee accommodation, the witness said. A. studied Sharia law, supported the actions of “Islamic State” and was a member of an Islamist fighting group in Syria. However, the police were unable to identify any specific crimes.

Authorities later discovered that suspicious payments had been received into A.’s accounts. Some transfers included the word “religion” in the subject line. There were indications of this from abroad. In 2019, British security authorities contacted their German colleagues: A. may be financing terrorist organizations, it said.

Then his name appeared in a chat that the German Federal Police (BKA) was interested in. A member of the Islamist militia “Haiat Tahrir al-Sham” wrote about A. and gave his account details, someone had previously stated that they wanted to send money to Syria. Now A. finally had the attention of the investigators. Security authorities classified him as an Islamist threat. In the spring of 2020, the Attorney General initiated proceedings against him on suspicion of supporting a terrorist organization abroad. At that time, the authorities knew nothing about his hawala business.

The Hawala system originated in the early Middle Ages, in the Near and Middle East. Because merchants found it difficult to carry heavy coins on their travels, they sought an easier way to pay for goods. „Hawala“ is Arabic and means something like „change“. Dealers in Asia and in the Gulf region still rely on comparable systems today. The method works via two pots:

In hawala banking, people bring cash to deposit offices to be paid out somewhere else in the world. „Hawaladars“ organize the transfers, they are in contact with each other and agree on how much money a customer gets in the payout office – minus the commissions for the parties involved, they send a code to their cell phone to authorize the payment.

The compensation is done via so-called reverse transactions, these are for example:

  • Cash: Some Hawaladars have cash brought in cars, trucks or planes to Turkey or Syria, for example. Before it gets to the payment offices there, it is exchanged in exchange offices. The method is risky, couriers are repeatedly caught at border crossings.
  • Gold: Some jewelry and gold dealers in Europe also have operations abroad, as subsidiaries, for example. A transfer via such shops is practical for Hawaladars, because the owners of the shops can easily and unobtrusively settle the cash amounts internally and pay them out again in the target countries.
  • Truck trick: Some Hawaladars use the collected cash to buy trucks from European dealers. They then have the vehicles shipped to countries in the Middle East. There, they are sold again for cash, which fills up the pots in these countries.
  • Cash trading: Sometimes it happens that money from the Near and Middle East needs to be transferred to Europe, for example to companies. Then large Hawaladars in this country need a lot of cash in a short time. The easiest way is to collect cash from middle and lower level hawaladars because they want to get rid of their bills. The Great Hawaladars get a commission for taking cash from the Hawaladars. In return, they have the amount credited to the relevant colleague at a hawala bank, for example in Istanbul.

There are companies in the Middle East that buy confectionery, cars or fertilizers from European companies and do not pay the bills by bank transfer. Instead, they bring the amount due in cash to a local payment office – along with the invoices, which are then sent to Hawaladars in Europe via WhatsApp. They make sure the bills are paid. Because the pots are well filled in this country, they pass on the amount due in cash to a third-party company, which in turn has the order to finally transfer the money to the European company.

It is one thing when a refugee sends his aunt in Syria a few hundred euros via hawala banking, when jewelers and greengrocers violate the paragraphs of the Payment Services Supervision Act in such transactions.

It is a different matter when a network is formed in which people move systematically outside the legal system, when vigilantism is practiced, when claims are enforced not by ordinary courts but by informal magistrates and gangs of thugs. Such systems challenge the state, much like biker gangs and the mafia, because it also serves as a system for financing extremism in Europe.

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