Suppression of the financial infrastructure of the drug trade Nickolay Aulov Deputy Director of the...

Suppression of the financial infrastructure Suppression of the financial infrastructure of the drug tradeof the drug trade

Nickolay Aulov

Deputy Director of the Federal Drugs Control Service of the Russian Federation

4th February, 2010Moscow, Russian Federation

Federal Drugs Control Service of the Russian Federation

FDCS of Russian Federation: Sharing of proceeds of the illegal

Afghan drug trade and heroin trafficking along the Northern

Route

Small-scale traders and retail –

$ 1 billion

Drug laboratories in northern Afghanistan –

$ 1billion

Taliban – $ 30 million

Slave labor of farmers in southern Afghanistan –

$ 100 million

Total: $ 17 billion

Transnational criminal and terrorist organizations (Islamic Movement of Uzbekistan (IDU), Hizb ut Tahrir, Akramia et al.)

- $ 15 billion

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FDCS of Russian Federation: The main channels of movement of drug income

Bank transfers

Non-bank systems (mail service, “Western Union” et al.)

Informal money transfer systems (Hawalla, etc.)

Cash couriers, etc.

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FDCS of Russian Federation: Areas of cooperation of the competent bodies of different countries

1. Research in the sphere of working out of methods of revelation of the financial transactions, connected with the illegal drug trade as well as typologies of

laundering of proceeds of the Afghan opiate sale

2. Research in the sphere of revelation of the geography of financial flows, associated with the illegal Afghan drug trade

3. Detection of lending agencies and countries -“financial centers” of the Afghan drug dealing

4. Organization of the full-fledged exchange of information concerning drug trafficking from Afghanistan and financial flows resulted from the drug sale

5. Working out of mechanisms of exchange of the results of the research and efficient cooperation between the national FIUs during financial investigations in

the cases connected with laundering of proceeds of the illegal Afghan opiate trade

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FDCS of Russian Federation: Ways of financing of international drug-related criminal structures

► Law enforcement agencies of Russian Federation are working continually on revealing the sources and ways of payments of drug smuggling and financing channels of international drug-dealing groups.

► The first inquiry into this system and its organizers was hold on in 1996. It was established in the course of investigation that the system had been created by Afghans by order for the purpose of quick anonymous money transferring between different countries. It was also ascertained that major heroin smugglers from Afghanistan to Russia through Tajikistan were using widely the means of the system.

► According to the information from intelligence sources since 1990-s, one of the wide-spread ways of settlings between accomplices of international drug-dealing groups is the illegal (so-called “underground”) banking system known as “Hawala”.

► This system was known then as “Hawala” named after its creator afghan Sherhan Mohammad Morad.

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FDCS of Russian Federation: Ways of financing of international drug-related criminal structures

► Following the work of Russian law enforcement agencies the activity of the “Sherkhan bank” was suppressed, the accessories were brought to criminal prosecution and made answerable for illegal banking and currency operations. According to the delivered judgment the criminals were sentenced to different periods of imprisonment.

► In spite of all the measures, in the course of investigation the complete set-up of the “Sherkhan bank” wasn’t revealed and its main leader Sherkhan Mohammad Morad wasn’t arrested. He is announced in international search and still escapes justice.

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► Sherkhan Mohammad Morad, wanted by russian law enforcement agencies for crimes commitment including illegal banking activities, money laundering, organization of criminal society. This person can currently use an ID with the name of Sherkhan Mohammad Farnood.

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► From the very moment of its foundation FDSC of Russian Federation gives much consideration for revealing and suppressing the financing channels of drug smuggling. Following the investigations there came an information about two illegal money transfer offices by “Hawala” system in Moscow.

► It was established that the offices exercised money transfers to different countries including drug-supplying regions without showing one’s papers.

СШАUSA

Китай (China)Германия(Germany)

Афганистан (Afghanistan)

Таджикистан (Tajikistan)

ОАЭ (UAE)

ИРАН(IRAN)

Великобритания (Great Britain)

Узбекистан (Uzbekistan)

Пакистан (Pakistan)

Москва (Moscow)

FDCS of Russian Federation: International investigation – «Hawalla»’s system.1. Illegal money transfer offices in Moscow.

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► From the very moment of its foundation FDSC of Russian Federation gives much consideration for revealing and suppressing the financing channels of drug smuggling. Following the investigations there came an information about two illegal money transfer offices by “Hawala” system in Moscow.

► It was established that the offices exercised money transfers to different countries including drug-supplying regions without showing one’s papers.

СШАUSA




ОАЭ (UAE)

ИРАН(IRAN)

Great Britain



Moscow

FDCS of Russian Federation: International investigation – «Hawalla» system.1. Illegal money transfer offices in Moscow.

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FDCS of Russian Federation: International investigation – «Hawalla»’s system.2. Scheme of function of money transferring offices in Moscow

Head of office

cashiers

drivers

Profit

Client

► Money in cash for transferring was accepted every day in special buildings (so called «Hawalla offices») located in Moscow. The head, one or more cashiers and drivers (money collectors) carried out their functions in offices. A fee (from 0,8% up to 3% from the sum), was taken and it was a profit of the group.

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Head of office

cashiers

drivers

► Money in cash for transferring was accepted every day in special buildings (so called «Hawalla offices»). The head, one or more cashiers and drivers (money collectors) carried out their functions in offices. A fee (from 0,8% up to 3% from the sum), was taken and it was a profit of the group. ► Information about every transfer of client was recorded by cashiers in special registers.

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Destination point

Sum of fee

Sum of transfer

Relevant number (code) of transfer

Name of sender

Name of recipient

► Every register contained the following information: direction of transfer, sums of transfer and fee, name of sender and recipient, and relevant code (number) of transfer. According to this code it was possible to receive money in cash at the destination office.

► No receipts were issued to clients, no other documentation was led in offices. Clients didn’t need to show their identity cards. System functioned on trust and provided almost absolute anonymity.

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ФСКН России: Система «Хавала», международное расследование2. Схема функционирования пунктов перевода денежных средств в Москве

FDCS of Russia: «Hawalla» System, international investigation3. Principles of functioning of system. Information exchange between the central and regional offices.

► At the end of each working day a person, who fulfilled the duties of accountant, entered the information of all money transfers to the computer and prepared consolidated reports on two «Hawalla» offices in Moscow. After the account preparation «accountant» sent it by email to the central office, that in different time was dislocated in China and in the UAE (Dubai).

ОАЭ (Дубаи)

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ФСКН России: Система «Хавала», международное расследование2. Схема функционирования пунктов перевода денежных средств в МосквеFDCS of Russia: «Hawalla» System, international investigation3. Principles of functioning of system. Information exchange between the central and regional offices.

► Reports that were received from different “Hawalla” offices were handled at the central office and then the transactions data that was to be given out, was send backwards.

СШАUSA




ОАЭ (UAE)

ИРАН(IRAN)

Великобритания (Great Britain)




► It was established, that large offices, similar to Moscow office, were operating in the USA, Germany, Great Britain, China, Iran, Tajikistan, Uzbekistan, Afghanistan, Pakistan.

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► The «Hawalla» system’s work was based on principles of fast data exchange with the following mutual settlement between the offices. There were no money transfers from one office to another.

Moscow

Dubai

Dushanbe

► For example a transfer, that was sent from Moscow could be received in cash in Dushanbe after the office in Tajikistan gets a fax or an email with the list of transfers to be given out. The heads of the office in Dushanbe were responsible for creating a cash money reserve.

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► In case of cash money lack in one of the offices (for example in Dushanbe), after the instruction given by the head of the central office, the head of another office (for example in Moscow), organized selling of the collected cash money at the so called «currency desk» charged the payment to the account of the offshore organization

Moscow

Dubai

Dushanbe

► Central office conducted the distribution of the cash money charged to the account of the offshore organization and sent the needed sum of money to the account of the front organization in the country of dislocation of another office (for example in Tajikistan), where the money was cashed. This is the way how the needed cash reserve in one of the offices was replenished (in this case in Dushanbe).

Offshore company

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FDCS of Russia: System «Hawalla», international investigation4. National security threat. Cooperation of Russia, USA, Germany and Great Britain

► It is established that the system was used by the international criminal groups, which are involved in drugs smuggling. From the Moscow offices of “Hawalla” the large sums of money resources were regularly sent to regions with a high drug criminal level. Only during 5 months of 2005 more than 10 million of US dollars was sent to the Afghanistan and more than 5 million dollars - to Tajikistan by means of “Hawalla”.

► The system “Hawalla” functioned according to the terms of full anonymity. The money flows passing through the mentioned system have been completely out of state bodies control. The nettings between “Hawalla” offices were carried out with the use of offshore organizations.

► According to confiscated from «Hawalla» Moscow office documents, over the period 2004 - May 2005, a total sum not less than 60 million US dollars was transferred from Russia to various states.

► In connection to the fact that “Hawalla” is the threat to safety of the involved states, FDCS of Russia initiated joint investigation with the Department of Defense of the USA and law enforcement agencies of Great Britain and Germany.

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FDCS of Russia: «Hawalla» system, international investigation5. The results of joint investigation

► As a result of joint investigation it was established that «Hawalla» system had been created and its functioning was under control of the multi-branched transnational criminal community, characterized by a clear role distribution, strict discipline, efficient data exchange and heightened conspiracy measures deployment.

► The assumed measures allowed to eliminate «Hawalla» offices in Moscow and in the USA (Chicago). Archive documentation and money in cash were confiscated from those offices. The leaders, cashiers and other participants of the international drug group subdivisions were arrested and charged of illegal banking and criminal income laundering. Numerous «Hawalla» offices heads’ property objects were arrested.

СШАUSA

Германия(Germany)


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FDCS of Russia: «Hawalla» system, international investigation5. The results of joint investigation

► Hashimi Farid Said Kazim, the head of one of the«Hawalla» offices in Moscow, was sent to jail

► Hashimi Vahid, the head of the«Hawalla» office in Germany,was arrested at the territory of Uzbekistan,extradited to Russia, awaiting the sentence

► M. Isak Rustam Ali Husayni,the organizer of «Hawalla» system, is being wanted by Interpol

► Gulam Haydar Afshar, the head of one of the«Hawalla» offices in Moscow, is being wanted by Interpol

Heads of «Hawalla» system

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18FDCS of Russian Federation: “Hawala” system, international investigation.VI. Cooperation with the Department of Homeland Security of the United States of America.

► “Hawala” system investigation was carried out by FDCS of Russian Federation in a close cooperation with the Immigration and Custom Enforcement of the Homeland Security Department of the United States of America. Due to the intensive information exchange and well coordinated actions of the law enforcements of both countries the activity of a big “Hawala” office in Chicago was suppressed.

► By the invitation of the Homeland Security Department of the United States of America, representatives of FDCS of Russian Federation took part as observers in some investigative operations in “Hawala” office located in Chicago. While a search in the office archives of financial documentation were withdrawn, identical to the accounts in Moscow office. Following analysis of the withdrawn documents, numerous records with contact information of accessories in Moscow were detected.

►Information exchange revealed that Moscow and Chicago “Hawala” offices had the same mode of action.

► illegal financial systems like Hawala are used actively for drug trafficking and terrorist activity financing, that is particularly proved by the intelligence services of Russia and the USA. The above systems represent an evident threat to the national security. A widespread opinion that those systems are inoffensive with their purposes and intended for mutual help of the members of ethnic groups in different countries is groundless

► efficient work for detection, documentation and suppression of such clandestine systems’ functioning can be conducted only through the coordination of efforts and close cooperation between the law enforcement agencies of different countries;

► taking into account the experience of joint work and the results obtained the intelligence services of Russia and the USA can cooperate actively and successfully for blocking such ways of financing of transnational drug organizations and, if necessary, assume coordinating part in similar international investigations.

FDCS of Russian Federation: The following conclusions can be drawn as a result of the joint work done:

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FDCS of Russia

Thank You for attention

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