From donor kidneys to greedy politicians, how hawala spreads its web

The infamous export of live-donor kidneys is typical of the many rackets, both spawned and facilitated by the hawala system of money transfers, experts say.

Prospective donees from countries as far afield as Canada, Germany, Japan and South East Asia pay for transplant jobs into secret dollar accounts held abroad by Indian doctors and nursing home owners.

The foreign patients then fly in to be taken to one of a thousand nursing homes spread around the country for clandestine transplants, claims Shahajilal Tamboli, executive menber of the Pune-based, Indian Society of Organ Transplantation.

Last year, the police intercepted at Bombay airport, a plane-load of Turkish patients who had paid the equivalent of two million rupees each for kidneys and transfer to hawala agents functioning from Istanbul.

But Reserve Bank of India experts say there are many less-gruesome services for which resident Indians are paid for through secret dollar accounts held abroad such as rental for premises hired out by diplomats and representatives of multinational companies here.

While nominal figures are shown on paper, landlords demand that rents be paid into offshore accounts for posh residences and upmarket business premises in such metropolises as Bombay and Delhi, according to diplomats and other resident foreigners.

As more Indians travel abroad and more foreign companies open offices here, the trend to collect rents or fees for services rendered in India through offshore accounts has been picking up, say RBI experts.

Such arrangements serve the dual purpose of evading the taxman at home while building operators against commissions ranging up to 10 per cent.

The incentive to collect offshore payments obviously rises as the real value of the rupee steadily slides while official exchange rates are maintained strengthening the hawala system.

Often, huge assets acquired in India through black money are swapped for property or cash abroad in deals involving non-resident Indians wishing to return home or invest in India with no one, epecially the taxman, any the wiser.

Official policy facilitates the legitimising of money brought into India through two schemes introduced by the present government in 1991 - The India development bond scheme and the foreign remittances (Immunity) scheme.

Both schemes were aimed at conversion of black income into white even though the funds may have left Indian shores through the hawala system or originated in tax evasion, bribery or criminal activity.

Although the immunity scheme did not even scratch the Rs 400,000 million of black money estimated to be generated each year, the list of those who actually took advantage of it is potentially more explosive than the Jain Hawala Diaries, says an RBI official.

"The list of those who brought in $ 2,300 million in the first year alone reads like a who is who and includes not only politicians and businessmen but also professionals," he said.

Criminal uses to which the hawala system has been put to were highlighted last year by the N N Vohra Committee report which spoke of a nexus between politicians, and elements of the Indian underworld which had shifted to narcotics, drugs weapon-smuggling and narco-terrorism.

'The cost of contesting elections has thrown the politician into the lap of these elements and led to a grave compromise by officials of the preventive and detective systems,' the report said.

The Bombay blasts case and the communal riots in Ahmedabad and Surat have demonstrated how the Indian underworld has been exploited by the Pakistani Inter Services Intelligence and the latter's network in the UAE to cause sabotage, subversion and communal tension in various parts of the country, the Vohra committee, which was headed by federal interior secretary N N Vohra, said.

The big smuggling syndicates with their international linkages have infected various economic and financial activities including hawala and black money operation causing serious damage to the economic fibre of the country, the report noted.

UNI