Iranians avoiding sanctions using Hawala
It is a matter of economics; supply and demand. In this case supply, demand and secrecy. Everything that is illegal comes at a premium, also in the financial sector. A lot of people are willing to pay some extra’s to keep their financials hidden. And this demand is met by (part time) shady financial advisors who use creativity to explore new routes to transfer money without any detection. Avoiding SAR’s and sanctions filtering is on their (hidden) agenda.
The Financial Times describes the case of Shahrom, an Iranian business man based in Tehran. He is doing well and has an investment business in Dubai. Transfering funds, especially in US dollars, from Iran to Dubai or the US will lead to problems because of sanctions and a nosy bank. “No problem”, according to Shahrom and other businessman in Iran.
Shahrom uses the hawala system to move the funds. The use of hawala systems in Iran has rocketed since the UN and US sactions programs against Iran. According to FT Sources, hawala bankers ask 1 – 1.5 % (and exchange rate spreads) for each transaction.
Roger Ballard, a hawala expert at Manchester University, estimates the hawala circuit in the Middle East and SE Asia to be $ 100 bn annually. Iranian businessmen claim that because of the sanctions programs, the euro has been dominating their deals lately.
The more risky the business, the higher the premium for doing that business will be. Hawala bankers see a booming demand, not in the least from clients that used to frequent the regulated financial sector. Within the hawala sector itself, some nice players will adept to these new demands in the market. It is this group that should be in the spotlight of intelligence and law enforcement agencies….
