New Delhi : Has Prime Minister Narendra Modi’s surgical strike on black money and counterfeit currency dealt a death blow to the illegal Hawala racket?
Well, if initial reports are anything to go by, the illegal chain of money transfer that operates on trust-based human networks across national borders, is bleeding profusely since the Tuesday night announcement by PM scrapping existing denominations of notes Rs 500 and Rs 1000.
“It’s a Hiroshima-Nagasaki moment for them. They are stunned. They don’t know what has hit them. In one stroke, the PM has nuked India’s parallel economy,” a top intelligence officer who has been tracking the Hawala network for years told News18.
A variety of police officers, chartered accountants and businessmen that News18 spoke to for this story said the major Hawala networks in Mumbai, Ahmedabad, Surat and Delhi are frozen since Tuesday night since the surprise government move. Shops that are actually fronts for illegal money transfer business stayed closed on Wednesday morning unable to handle calls from anxious clients.
According to a conservative estimate, the size of the Hawala market in India is close Rs 2 lakh crore. Security agencies have long been suspecting that a good portion of the Hawala proceeds is routed to fund terror activities in various parts of India. Intelligence agencies believe that of late Hawala money has been playing havoc in Kerala and Karnataka where the terror money has helped launched a slew of new outfits aligned to global Islamist terror groups in these hitherto peaceful states.
“A lot of money is sent abroad using this route. The scrapping of Rs.500 and Rs.1000 currency notes has ended several businesses. They are literally on the roads. Many Hawala operators are left with several hundred crores in cash. What will they do with it?” said a Mumbai-based businessman who deals in export and import business.
His words were echoed by another businessman in Bengaluru who said all Hawala transaction stopped within an hour of PM’s speech. “A lot of outsiders invest in Bengaluru real estate and about 50% money comes through Hawala. That has now stopped. The property prices will fall sharply in the coming days. It can even lead to distress selling. It is the best time for those who have white money to buy properties,” he said.
According to a top police officer from Karnataka, almost all money meant for terrorism and other anti-India activities enters India through the Hawala route. “In a recent meeting of top Intelligence Bureau (IB) officials we came to know that Karnataka and Kerala receive over Rs 50,000 crore through Hawala. These two states have strong links with the Gulf nations. We hope terrorism activities will be hit hard by this decision,” he said.
According to another person who closely follows India’s black money market, immediately after PM’s speech Hawala operators decided to suspend business for the next three months. Initially, they thought that it was some black money amnesty scheme and assured the people that their money would be paid after three months after deducting 30% of the money. “After Revenue secretary’s clarifications they have realised that it is not an amnesty schemes. I don’t think anyone will get his or her money back” he said.
All security experts agree that Hawala is used for big black market businesses like gold smuggling, real estate, betting, prostitution, drugs etc. All these sectors generate huge cash on daily basis and they may take years to come back to life.
A Mumbai hotelier told News18 that some Hawala operators he personally knew had bought several kilos of gold with the money they had at exorbitant prices after the PM's announcement.
“But it is a temporary thing. They can’t do it for long. I think they are finished for the time being. It will badly hurt commodities, bullion and real estate market. Already there are no buyers,” he said.
Currently, enforcement authorities bank on the FEMA (Foreign Exchange Management Act) 2000 and PMLA (Prevention of Money Laundering Act) 2002 to tackle Hawala transactions. But these laws had little impact on the thriving business.
With one announcement PM Modi seems to have finished the business for the time being.
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