Friday, August 26, 2005

Two local men arrested in Madrid drug money laundering operation

Spanish police heroin seizure

Two Gibraltarians were arrested in Madrid yesterday in a police swoop on an organisation allegedly involved in smuggling heroin and laundering the proceeds through an alternative, unofficial banking system known as ‘hawala’. Spanish police detained six men, including the two locals, and seized 17 kilos of pure heroin with a street value of 2.85 million Euros, 500,000 Euros in cash and three vehicles.

According to the Spanish Ministry of the Interior (Ministerio del Interior) in Madrid, the operation began three months ago when the Brigada Central de Estupefacientes identified an organisation made up of two closely linked groups, one involved in heroin smuggling and the other in money laundering.

“Both were perfectly linked and coordinated,” the ministry said in a detailed and lengthy statement on the operation.

Early this month, three drug traffickers travelled to the city of Castellón to pick up the heroin, which was destined for distribution in Madrid and its suburbs.

The three were arrested as they returned to the Spanish capital in two vehicles, the first car acting as a scout for police controls.

They were identified as J.M.J and A.V.J, both resident in Madrid, and J.J.O.P, a resident of Málaga.

In a related operation, three men were arrested in connection with the alleged laundering of the proceeds from the sale of the heroin.

The three were identified as H.S.A, a Pakistani national, and C.D and L.C.D, described by the Interior Ministry as “English nationals and resident in Gibraltar”. Informed sources told the Chronicle that the men, father and son, were Gibraltarians.

At the time of their arrest, the two Gibraltar residents were carrying a backpack with 163,000 Euros in cash.

Their vehicle, a fast car valued at 120,000 Euros, was also seized.

Spanish police also carried out a number of searches in residential premises in Madrid and found money-counting machines and 310,000 Euros in cash in the Pakistani national’s home.

The proceeds from the heroin were allegedly laundered using an ancient banking system known as 'hawala'.

The system, which originated in south Asia, exists in parallel to traditional financial structures and is routinely used around the world to conduct legitimate money transfers.
But it is also open to abuse.

Hawala allows the transfer of funds with little or no paperwork, relying on trust and deep rooted, close relationships between dealers around the world.

“The components of hawala that distinguish it from other remittance systems are trust and the extensive use of connections such as family relationships or regional affiliations,” says a report on hawala and money laundering prepared by Interpol.

“Unlike traditional banking…hawala makes minimal (often no) use of any sort of negotiable instrument.

Transfers of money take place based on communications between members of a network of hawaladars, or hawala dealers.”


The Interpol report adds that, in common with any financial system, hawala can and does have a role in money laundering.

“Hawala transfers leave a sparse or confusing paper trail if any,” the report says.

“Even when invoice manipulation is used, the mixture of legal goods and illegal money, confusion about ‘valid’ prices and a possibly complex international shipping network create a trail much more complicated than a simple wire transfer.”

Spanish police said the investigation, codenamed Operation Hench, remained open.

Informed sources said investigators would be closely checking the backgrounds and connections of the arrested men, both in Spain and in other countries.

The investigation will likely include a security dimension because several probes into recent terrorist atrocities, including the Madrid bomb blasts, have established links between the illicit drugs trade and terrorist groups.

Likewise, the hawala system is known to have been used in the past to finance terrorist activity.

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