Posted on 04/14/2008 4:57:59 PM PDT by nuconvert
Analysis: How Iranians are Avoiding Sanctions
April 14, 2008
The Financial Times
Anna Fifield in Tehran
When Shahrom, a Tehran developer, wants to transfer thousands of dollars to his property investment business in Dubai, or to associates in the US, he does not go to the bank. Instead, like thousands of other Iranian business people, he turns to his trusted money changer.
Using a centuries-old financial transfer system known as havaleh in Iran and elsewhere as hawala, its Arabic name, Shahrom moves his money easily – and just about invisibly.
“I usually transfer money into my own account in Dubai but my money exchange dealer tells me not to transfer more than $100,000 (£50,350, €63,125) at a time because it might look suspicious,” he says in his office in central Tehran, the walls adorned with photos of apartment towers his company has built. With sanctions in place against Iran, he and other dealers and businessmen who spoke to the Financial Times for this article asked that their surnames not be used.
“So I usually transfer money in batches of $40,000 or $50,000. But if I’m transferring money to or from the US, I send it through Turkey. I don’t want to make them suspicious either,” Shah¬rom adds.
Hawala, a cheap and remarkably reliable system for money transfer, dates back to the eighth century but in recent decades has become the favoured method employed by migrant workers from south Asia and the Middle East to send earnings back home. The system has been used by business too – and since the US and the United Nations started curtailing Iran’s access to the international financial system following the regime’s refusal to stop enriching uranium, the use of hawala in Iran has rocketed, according to business people, money changers and analysts.
After almost three decades under various US sanctions, Iranians have proven adept at skirting the restrictions. Although the latest US crackdown on Iran’s financial sector and the sanctions imposed by the UN are hurting, Iranian businessmen have found a way to work around them.
Much of the traded goods that were being sent from countries in Europe and Asia – and even from the US – have been re-routed through Dubai, making it impossible to tell which are destined for the United Arab Emirates rather than for Iran. The use of hawala is a further way to circumvent western curbs. The apparent sharp increase in the use of informal money transfer systems is ringing alarm bells in Washington, which has been trying to scrutinise Iranian transactions.
Most of the time, hawala is used for legitimate transfers, but its anonymity and the lack of a full paper trail means it has attractions for more dubious dealings too. After the September 11 attacks on the US in 2001, Washington officials worried that al-Qaeda had used hawala as a conduit to provide finance for its mission. Although these suspicions were later discounted, hawala is unregulated and very difficult to police.
This is how it works. Mr A, an importer of Chinese shoes, goes to a money exchanger in Tehran and says he wants to send $10,000 to his supplier. The broker calls his counterpart in Beijing, who goes to the supplier’s bank and deposits the money. The Beijing counterpart carries a $10,000 debt against the broker in Tehran. When an Iranian in China wants to send $5,000 to his family in Iran, he goes through the hawala process in reverse. Over time, the debts of the brokers in Tehran and Beijing cancel each other out.
As the system is founded on honour, brokers – just like banks – know they will go out of business if they renege on a deal. And it is very fast – with average transfer times of 48 hours, it is much quicker than an international bank transfer or Western Union, thanks to the absence of bureaucracy. Hawala can often also be much cheaper than traditional methods.
Iranian hawala dealers charge a fee – typically 1-1.5 per cent of the total or sometimes a flat $50 – or use exchange rate spreads to generate their income. In a variation on this process, the money changer in Tehran uses a counterpart in Dubai, who deposits the money into an emirate bank account and then wires the money through the international banking system.
In that way, imported consumer goods enter Iran. “With the US trying to impose ever more vigorous financial sanctions on the other, how on earth else could the bazaar continue to operate without recourse to hawala?” asks Roger Ballard, a hawala expert at Manchester University. Saeed, who sells pots and pans imported from China in Tehran’s bustling bazaar, confirms this suggestion. “If we wanted to send money through the banking system it would cost a small fortune, so we give the money to dealers and they send the money through Dubai to China,” he says.
“These people are family, friends, people we trust. This is our secret way. If you talk about it, maybe they will try to put sanctions on this too,” Saeed says, before abruptly closing his mouth.
The liquidity for hawala transfers is provided by the huge flows of remittances sent from workers in first-world countries to their families in the Middle East and south Asia. Mr Ballard estimates that annual flows of such remittances total $100bn. “This is all about the globalisation of the world economy,” he says.
(con't at source link)
pong
Brilliant.
German Security Firms Reportedly Working in Iran
Jerusalem Post | April 14, 2008
Posted on Monday, April 14, 2008 08:06:42 PM by nuconvert
http://www.freerepublic.com/focus/f-news/2001605/posts
Nothing new under the Sun.
This is the method Knights Templar used for pilgrims to travel to the Holy Land without carry large amounts of gold — merely a cipher.
Of course, then it was used to avoid the raiding mohamedons.
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