Are Hawala transactions playing a major role in the Bihar polls?

On 21st September, an India Today sting operation exposed the dealings taking place in the shady bylanes of Chandni Chowk and Lajpat Nagar in New Delhi, where crores of rupees were being channelled from New Delhi to different parts of Bihar through the hawala route. With rumors of candidates spending anywhere between Rs 2-6 crore per seat (the official limit is 28 lakhs), cash, gold, liquor and drugs are making an easy and grand entry into Bihar.

A day before the third phase of the elections, on 27th October, unaccounted cash worth Rs. 6.85 crore, 2.45 lakh litres of illicit country-made and foreign liquor worth Rs 4.37 crore were seized by the Election Commission from different places in the state. On 11th October, the EC had also recovered Rs 19 crore in cash in addition to the Rs 18.5 crore seized by other departments including IT officials, state police and the state excise department. Apart from cash, these teams have also seized 71,920 litres of liquor, 827.91 kg ganja, 9,132 kg mahua, 336 grams of heroin, 8.25 kg of gold jewelry that were being transported to serve as illegal inducements for voters.

Elections in India are a spectacle and veteran politician and former Maharashtra Chief Minister, Sharad Pawar reaffirms just that, “contesting elections is an expensive proposition hawala or no hawala.” The concept of hawala is not fully understood by most Indians who rely solely on the banking system for money transfer.

The idea of transferring money without any movement is unique by itself and transactions between brokers or angadias as they are called, are done purely on the basis of trust. The Interpol even has a definition for hawala -“money transfer without money movement.”   In the last 60 years, India is estimated to have lost USD 1.5 trillion in the name of ‘tax avoidance’, with hawala transactions accounting for 40 per cent of it. Although these transactions are punishable under the Foreign Exchange Management Act, 2000 and Prevention of Money Laundering Act 2002, hawala transactions often go unnoticed as politicians and big hawala operators have been known to share a cosy and symbiotic relationship.

The EC has woken up to the threat of hawala and has been working on developing intelligence capabilities to monitor suspicious transactions and also identify and map expenditure sensitive areas and persons associated with hawala operations during elections. However, the scale of the operation is so overwhelming that former Chief Election Commissioner SY  Qureshi has gone on record to say that that failure to clamp down on these operations, should easily count as one of the EC’s biggest failures.

A hawala route leading to Bihar could resemble this: six months prior to elections, hawala money starts entering India and via installments, the money is transferred during various phases of election campaigns. The origin of the funding is usually Dubai. Funds are illegally routed from Dubai or Karachi (sometimes with the help of the D-company). The Dubai market rumoured to be directly under the control of the ISI, which has used this route in the past to move terror and drug money. The next stop would ideally be Kerala. With its close nexus with the Gulf, Kerala is a hotbed for hawala transactions. The money may then be routed to New Delhi and finally to its destination, Bihar using secret passwords like matching currency notes or code words such as arz kiya hai, pan khaya etc.

The entire operation is run on the basis of trust and hawala dealers charge an interest rate between 2-5% to transfer money during the poll season.   A Congress party worker we spoke to, offers another perspective. In an attempt to avoid the EC’s scrutiny, he argues that nowadays, hawala only comes into play only after elections. During elections, every block president mobilises resources (good old traditional black money from unaccounted transactions) and manpower to work with the local candidate. Each block president is then given a token/password from a senior leader and once the elections are over and the EC’s flying squads are a lot less active, he/she goes to the neighbouring state to recover his reimbursement for the costs he incurred, from an agent completely unknown to him.

During elections, the EC’s flying squads and special police force closely monitor state borders. As a result, physical transportation of funds becomes a challenge. In the case of hawala, the dealers solely rely on the local network based in the destination city to drop the amount to the concerned person directly. Hence, while a hawala transaction might incur a high interest rate, it still remains a safer alternative for the political class.

Moreover, if local rumors floating in Patna are to be believed, this time around, funds are also making its way to Bihar from Saudi Arabia via Nepal through the hawala route. In the late 2000, terrorists like Yasin Bhatkal and Asadullah Akhtar a.k.a. Haddi infiltrated India through the Nepal border.

A political analyst we spoke to suggests that Bhatkal might have been very successful in connecting Wahabi Muslims in Bihar with potential donors in Saudi Arabia. As this network strengthened over the years, they became a force to reckon with. Bhatkal was eventually arrested from Bihar in 2013 by the National Investigation Agency.

But the networks established have remained strong. More recently, Rs. 60.30 lakh Nepali currency was recovered in poll-bound Bihar. The 750 km unfenced Indo-Nepal border along the state has in the past also been instrumental in facilitating rampant trade in fake currencies.

Hawala transactions pose a serious security threat as these illegal money links are either directly or indirectly connected to organisations like the D-Company or ISI. On September 24, 2015, West Bengal woke up to a fake lottery scam involving hawala ties with Dubai. The Central Board of Direct Taxes seized Rs 200 million and close to 20 sacks of notes were recovered from two locations in Kolkata and one in Siliguri. Interestingly, RAW investigations have suggested that 30 per cent of these bank accounts which were involved in the fake lottery transactions, were in fact operational from Bihar.

A senior IPS officer from Uttar Pradesh who has investigated various hawala cases in the past confidently asserts that terror groups fund elections through the hawala route and in turn blackmail politicians when they are voted to power. He says, “when it comes to elections there are no rules, no morality.” And on November 8th, when the fortune of 3000 odd candidates will be revealed, irrespective of who comes out victorious, the hawala operators having charged their exorbitant interest rates to channel money in Bihar, will be laughing their way to the ‘banks’. Pun intended.

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