WRITTEN QUESTION E-2038/01

by Freddy Blak (GUE/NGL) to the Commission

(13 July 2001)

Subject: EU humanitarian aid and Hawala

Dacaar, the humanitarian organisation, which conducts aid operations on behalf of the EU in Afghanistan for example has apparently been working with an illegal currency network, Hawala. Hawala is a closed secret world-wide network which within a few days can transfer unlimited amounts anywhere in the world. The money is transferred without vouchers and can therefore never be traced. Interpol and the international narcotics police regard the network as a dominant element in global money laundering. In most countries Hawala is illegal.

1. Will the Commission confirm or deny the fact that EU aid appropriations have been channelled via Hawala?

2. If the answer is yes, will the Commission state whether it considers it proper for EU aid funds to be used to conceal the laundering by Hawala of the proceeds of drugs and the smuggling of human beings?

Answer given by Mr Nielson on behalf of the Commission

(18 October 2001)

In order to transfer funds to its contractors, the Commission uses the services of public banks, which are established in the Member States, and which have been selected within an open call for tender. The transfers are normally made to bank accounts in the country where the contractor is established. Thus, the Commission does not use the Hawala system and is not responsible, if a contractor decides to use this network for his own purposes.

Nevertheless, in order to allowing for a better understanding of the Hawala system and its concrete implications in the Afghan context, the Commission is pleased to inform the Honourable Member about the money transferred by humanitarian non-governmental organisations (NGOs) operating in the region.

The Hawala bank as a generic name refers to all financial transactions outside an official banking system. The system is used intensively between members of an ethnic community and allows family members for instance to transfer money to each other. It entails a close social cohesion between people as it rests on the essential condition of absolute trust. Various diaspora use it a lot around the world, mainly in Arabic countries. It is the most ancient way for money dealings. As such, the system is not illegal although it allows the transactions to be less detectable as they are internal to a community and not easily traced.

In the case referred to by the Honourable Member, the Hawala system is used by humanitarian NGOs and international organisations in the absence of official banking institutions in Afghanistan. NGOs operating in Afghanistan need cash inside Afghanistan in order to pay for local staff, local procurement and general operation of offices. Considering the security conditions in Afghanistan, physical transfers of cash into Afghanistan are too risky for NGO staff as well as for the funds and consequently, there is no secure alternative to this system.

On the basis of information received from the Danish Committee for Aid to Afghan Refugees (Dacaar) as well as from the Danish Ministry for Foreign Affairs, the Commission can confirm that Dacaar as well as most other NGOs and United Nations (UN) agencies in Afghanistan use the Hawala system.

The operation used by Dacaar can be described as follows:

- The NGO office in Afghanistan requests funds in dollars from their NGO headquarters in Pakistan.

- The NGO headquarters in Pakistan will have a contract with a legally registered money dealer, which upon request from the NGO authorises a middleman in Afghanistan to release funds to the local NGO office in Afghanistan.

- The NGO office in Afghanistan informs the NGO headquarters in Pakistan when it has received the money from the middleman.

- The money dealer is then paid by the NGO headquarters in Pakistan in order to get his outlay back plus a commission amounting to 1 % or 1,5 %. Thus, the transaction is concluded.

Finally, it may be added that all implementing partners for Community humanitarian or development projects are submitted to strict and regular financial controls. The Commission has not identified any irregularities in Dacaar's financial administration.