Saturday, May 15, 2010
A hawala is
an alternative or parallel remittance system. It exists and operates outside of, or parallel to 'traditional' banking or financial channels. It was developed in India, before the introduction of western banking practices, and is currently a major remittance system used around the world. It is but one of several such systems; another well known example is the 'chop', 'chit' or 'flying money' system indigenous to China, and also, used around the world. These systems are often referred to as 'underground banking'; this term is not always correct, as they often operate in the open with complete legitimacy, and these services are often heavily and effectively advertised.
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. Unlike traditional banking or even the 'chop' system, 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.
If a defendant were charged with various crimes, with the allegation being that the defendant used a hawala to commit these crimes, expert testimony that the defendant did not use a hawala could run afoul of Federal Rule of Evidence 704. That was not, however, what happened in United States v. Banki, 2010 WL 1875690.
In Banki, Mahmoud Reza Banki was charged with (1) conspiracy to violate and the violation of various Executive Orders and regulations issued under the International Emergency Economic Powers Act; (2) operating an unlicensed money transmitting business; and (3) making materially false statements in response to inquiries by the Office of Foreign Assets Control.
As the conduct underlying the...charges, the Government allege[d] that Banki and unnamed co-conspirators "operated an informal value transfer system known as a 'hawala' [in which] funds are transferred by customers to a hawala operator, or 'hawaladar,' in one country (here, the United States), and then corresponding funds, less any fees, are disbursed to recipients in another country (here, Iran) by foreign hawaladars associated with the U.S.-based hawaladar."...Banki claim[ed] that the transfers which are the subject of the Superseding Indictment were family remittances that, according to him, were lawful under the relevant regulations.
To prove his claim, Banki sought to have Daniel Gill, a former Special Agent with the FBI,
testify that the conduct charged in the Superseding Indictment [wa]s not consistent with a hawala because: (1) Defendant purportedly did not have a ready pool of cash in the United States for disbursements as one would expect of a hawaladar; (2) there [wa]s no evidence of disbursements from his account or settlement payments; and (3) the amount of money at issue in this case [wa]s too small to make the operation of a hawala profitable.
The government moved to preclude this testimony, claiming, inter alia, that it would run afoul of Federal Rule of Evidence 704, which indicates that
(a) Except as provided in subdivision (b), testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact.
(b) No expert witness testifying with respect to the mental state or condition of a defendant in a criminal case may state an opinion or inference as to whether the defendant did or did not have the mental state or condition constituting an element of the crime charged or of a defense thereto. Such ultimate issues are matters for the trier of fact alone.
The United States District Court for the Southern District of New York disagreed, concluding
As I understand it, Mr. Gill will explain how a hawala functions, describe some classic characteristics of a hawala, and then compare the conduct alleged in this case to his definition of hawala to demonstrate what, in his opinion, is an inconsistency between the charges and the facts. There is no suggestion that he will opine on Defendant's mental state, and thus the testimony does not run afoul of Rule 704. Moreover, Mr. Gill's testimony may have little bearing on the ultimate factual issue to be decided, as it is conceivable that the jury could find that Defendant's alleged conduct does not share the hallmarks of a traditional hawala, but that Defendant nonetheless provided money transferring services in violation of the IEEPA/ITR.