Berlin Senate Aims to Close Legal Gaps in Illegal Payment Systems

The Berlin Senate is taking decisive steps to combat organized crime by addressing significant legal loopholes that facilitate clandestine financial transactions. A primary focus of this initiative is the Hawala banking system, which operates without licensed banking institutions and is prevalent in Asia and Africa, particularly in the Middle East.

Justice Senator Felor Badenberg has expressed concerns over the opacity of transactions facilitated by Hawala banking. She indicates that this system can inadvertently support terrorism financing, money laundering, and human smuggling, as large sums of cash often evade immediate confiscation.

Currently, there is no legal framework permitting the seizure of funds derived from unlawful transactions, a gap that Badenberg believes must be urgently addressed. During the ongoing Justice Ministers' Conference in Bad Schandau, Saxony, Berlin plans to submit a proposal aimed at creating the necessary legal provisions to tighten regulations surrounding these financial activities.

Hawala, which translates to "check" in Arabic, is characterized by its minimal traceability, making it a preferred method for transferring large amounts of money without leaving a clear paper trail. Investigators suspect that significant sums are being transferred from nearly all major German cities through this method.

In the Hawala system, the sender provides a sum and a code to a local Hawaladar in Germany, predominantly male operators often found in cafes, small car rental businesses, or trading shops. The Hawaladar then communicates the details to a corresponding Hawaladar in the Middle East. The recipient, upon providing the code, collects the funds from the local Hawaladar, avoiding conventional banking channels.

Financial transactions between Hawaladars are typically settled periodically, which minimizes the chances of detection during cash transfers. Reports suggest that significant amounts of previously illicit funds could potentially be transferred legally into Germany as gifts, loans, or investments.

Berlin has seen a substantial increase in the financial impact of organized crime, with estimates suggesting that losses amount to approximately three billion euros nationwide since 2014. In 2023 alone, Berlin reported financial damages of around 57 million euros linked to such activities. However, authorities have become more effective in asset recovery, seizing 4.9 million euros in 2023 and increasing that figure to 8.8 million euros in 2024.

Support for these legislative changes is echoed by the police union. The Berlin branch of the union emphasizes that Hawala banking is instrumental for various organized crime factions in laundering illicit assets and reintegrating them into the legal economy. They advocate for a legal framework that would facilitate asset recovery and support a shift in the burden of proof regarding financial crimes.