US embassy cable - 04ABUDHABI1740

C O N F I D E N T I A L ABU DHABI 001740 
 
SIPDIS 
 
STATE FOR NEA/ARP, S/CT, INL/ENT, EB/ESC 
STATE PASS FEDERAL RESERVE 
TREASURY FOR ZARATE, GLASER, AND MURDEN 
 
E.O. 12958: 5/24/09 
TAGS: EFIN, ETTC, PTER, ECON, TC 
SUBJECT:  Hawala: The Indian Embassy's Views 
 
CLASSIFIED BY DCM RICHARD A. ALBRIGHT FOR REASONS 1.5 (B 
AND D). 
 
1. (SBU) S.K Reddy, the First Secretary of the 
Indian Embassy called on EconChief to discuss 
hawala.  Reddy said that he had not yet met with 
the Central Bank on the subject, because he was 
waiting for instructions from India's Central Bank 
before approaching the UAEG.  He said that hawala 
was illegal in India, but still existed.  He 
explained that the hawala network in India 
developed to serve the gold smuggling market when 
India controlled gold imports.  He also 
acknowledged that Indians used hawala to avoid 
currency controls.  Since India opened up its 
economy, however, he said that he thought hawala 
usage had declined. 
 
2. (C) Reddy said that he thought there were still 
strong ties between the gold market and hawala. 
People still smuggle gold into India in order to 
avoid customs duty and the smugglers use hawala to 
get better rates and to avoid paying taxes.  He 
suspected that many of the UAE gold dealers still 
had ties to hawala dealers (hawaladars).  Although 
Reddy denied knowing the identity of any hawaladar, 
he stated that his constituents certainly knew who 
they were. 
 
3. (SBU) According to Reddy, Indian workers used to 
comparison shop between the formal exchange houses 
and the hawaladars.  Now the workers are more 
likely to use the formal networks.  Indian laws 
have been changed to make it easier for them to 
move money and therefore the rate difference has 
declined.  In addition, the formal money exchange 
and transmission houses now target the market.  He 
explained that when the exchange houses notice that 
a number of workers are coming from a single region 
in India, they meet with the workers and offer to 
set up branches to service the region. 
 
4. (SBU) Reddy said that some of the workers from 
poorer regions prefer to use hawaladars or that 
their families in India prefer hawaladars, because 
they are nervous about the banking system and don't 
want to visit banks.  He noted that some Muslim 
women prefer the hawaladars, because they don't 
have to leave their houses.  The hawaladar comes to 
them. 
 
5. (C) The Indians are concerned about the use of 
hawala in laundering money for organized crime and 
in funding the insurgents in Kashmir.  He also said 
that hawala was used to move the proceeds of 
illegal betting for cricket matches.  According to 
Reddy, the Indians will bet millions of dollars 
when their teams are playing.  The proceeds of this 
worldwide illegal betting are all moved by hawala. 
Millions of dollars are bet when Indians play.  He 
noted that a few years ago the Indian team was 
prohibited from participating in Sharja's cricket 
tournament, because of the size of the betting 
involved.  The Indians were concerned that the 
amount of money bet made it highly likely the 
matches would be fixed. 
 
Wahba