Monday, October 21, 2013

How illicit cash moves into, out of E. Africa

Those who go for the black market money

Those who go for the black market money transfers have something to hide.  These are people who don’t pay taxes or don’t want their financial details to be known 

By The Citizen

Dar es Salaam/Nairobi. When Ahmed, a Dar es Salaam-based businessman wanted to transfer $50,000 (about Sh80 million) in January, this year, without involving the banking system, he was directed to see a Pemba merchant of Arab origin, currently running an import-export business in downtown Kariakoo.

A friend, who is an importer of used Japanese vehicles, advised him to use the ‘Pemba courier’, saying the service was fast and reliable and that there was no room the money could be traced by authorities.

Upon meeting the Pemba businessman, Mohammed, and explaining that he wanted to transfer $50,000 to his brother in London, he was instructed to give the exact name and mobile number of the recipient.

He was then instructed to pay cash in Tanzanian currencies based on day’s prevailing exchange rates. He paid Sh81 million at the exchange rate of Sh1,620 plus the service fee of $500 (810,000). An hour later his brother called him from London to confirm receipt of the money. The recipient received it via a man of Somali origin who identified himself as Nasser.

Had the Dar es Salaam trader used the bank, the exchange rate would have been Sh1,650 per dollar. He would therefore have paid Sh84 million including bank charges. Above all, it the transfer would have taken a minimum of 72 hours.

“I saved a whopping Sh2.99 million and it took only an hour to transfer the money,” Ahmed said as he chatted with friends about the booming illegal money transfer business in Dar es Salaam.

He was assured that even if he wanted to transfer $1 million, arrangements for the transfer of such a huge amount would have been made, provided he notified Mohammed at least a day in advance.

According to one financial expert with the NBC who spoke to The Citizen on the conditions of anonymity because he is not the authorised spokesman of the bank, Ahmed’s money may have been obtained illegally. “It’s not about bank charges. Those who go for the black market money transfers have something to hide.  These are people who don’t pay taxes or don’t want their financial details to be known,” he said over the phone yesterday,” he said.

Informal money transfers, especially internationally, is becoming big business not only in Tanzania but the rest of East Africa. This gives criminals a leeway to transfer their ill-gotten monies to the destination of their choice.

In Dar’s Kariakoo, which is the heart of business in the country and neighbouring countries, as well as Namanga, which near the Oyster Bay Police Station, are the main conduits of illicit money exchange for people in various  parts of the globe.

According to a report published yesterday by The East African, low supervision capacity of central banks in the region gives criminals the leeway to transfer illicit funds through these informal money transfer channels, thus endangering both the financial and security stability of the region.

New data shows that the region is increasingly becoming home to illegal remittance channels. Any attempts by regulators to tighten rules on business seem to have failed.

According to a report by The East African newspaper, Kenya’s anti-terrorism police unit said financing for the Westgate shopping mall attack in Nairobi last month was done through informal money transfer channels popular with the Somalia Diaspora as hawala.

This particular money transfer system is currently being clamped down on in Britain and the US.

Security officials and other sources who did not want to go on record because of the sensitivity of the issue said attackers started receiving money through hawala about eight months ago.

Security agencies have since said the financing of the 1998 US Embassy bombings in Kenya and Tanzania, and the July 13, 2011 attacks in Mumbai, India were facilitated through the same means.

According to the United Nations High Commissioner for Refugees report released this year titled Migrant Smuggling in the Horn of Africa & Yemen UNHCR 2013, illegal migrants are often abducted in Kenya, Ethiopia, Djibouti and Yemen and their relatives are forced to pay ransoms through hawala if they are to secure their freedoms.

The report reveals that in early 2012, the rates of ransom per abducted immigrant across the region ranged between $100 and $300. But by the end of last year, the rates reported by freed migrants had gone up to $600-$800. By early 2013, the rates had risen to as much as $1,000.

“The informal hawala system possesses several characteristics that account for its widespread use, including speed, convenience, versatility and potential anonymity, which makes it useful for illicit purposes as well as legitimate transactions,” notes the report released last month.

Ordinarily, the system operates on trust. A person sending money, for example, from Turkey to Nairobi, will go to the local hawala agent, give the name and the telephone number of the recipient and the amount to be sent.

The agent in Turkey calls his counterpart in Nairobi and gives instructions to pay the deposited amount to the owner of the Kenyan number. The owner is called and the only security measure is to verify the telephone number of the sender.  The agents have their own way of settling the accounts. There are no records of the receiver or sender except their telephone numbers, and no papers are signed.

The Citizen established that currently, there was no law regulating hawala and other informal money transfer operations in Tanzania. The country passed an amended anti-money laundering Act of 2012, which and the country to established a Financial Intelligence Unit tasked to curb illicit transfer of funds.

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