Referral Business

Transferring money from one part of the world to another without moving it requires no banks, no currency exchange, no need to fill out a form, and no need to pay a fee.

One is the sender and the other is the one to whom the money is due, and in between there are at least two other people whom you can call mediators or middlemen.

This is a reference business that existed long before the advent of the traditional banking system. This has been going on for centuries due to the ease of money transfer and the many benefits available to the people involved.

It can transfer millions of dollars around the world, without knowing how much money there is and who is controlling it.

The name refers to the illegal transfer of money from one part of the world to another and the most important role in this is played by the agent or middleman who can be called the mediator. Middlemen rarely leave a record of a transaction.

As such, it would be a major hurdle to find out where the money is coming from and where it could be used for money laundering, drug trafficking and financing extremist organizations.

Alberto Prego Moreno, a professor of international studies at the University of Pontifacia Camilla in Madrid, told BBC Mando that although the reference itself was not linked to the activity, it could be a tool to achieve the wrong goals. Spread across Africa, South Africa and Southeast Asia.

Parallel to the banking system

It has been described as a traditional and informal process that runs parallel to any other banking system and its importance is based on the confidence of the middle man.

For example, a person from New York can send money to Islamabad without opening a bank account. All he has to do is consult a local middleman and give him the money in dollars and a password that both the sender and the recipient agree on. In other words, in addition to these two passwords are now known to the sellers.

Now the local middleman contacts the middleman in the Pakistani capital and tells him the amount and password.

This second middle man pays the same amount in Pakistani rupees to the person where the money was to be delivered. He makes sure the money reaches the right person and asks for a password.

The whole process is completed in just a few hours and the middleman takes a small amount of money as a commission.

Where did the reference come from?

It is not clear when the reference began, but some people associate it with India in the Eighth Century in connection with the Silk Road.

The Silk Road was in ancient times the trade route from China to the rest of the world. The silk trade flourished during the Han Dynasty between 200 BC and the second century BC. Earlier, caravans of the Silk Road traveled west from the northern tip of the Chinese Empire.

But then the tribes of Central Asia came in contact and gradually the route reached Rome via China, Central Asia, North India, present-day Iran, Iraq and Syria. It is noteworthy that not only silk was traded on this route but also all the people associated with it used to trade their products through this route.

But there were frequent thefts and lootings on the Silk Road, so Indian, Arab and Muslim traders resorted to various methods to protect their profits.

Merchants used a password that was an object, word, or gesture, and similar objects, words, or passwords that had to be revealed to the recipient. In this way, they would ensure that money or goods were transacted in the right hands.

The age of this system can be gauged from the fact that the first bank in India was the Bank of India, which was established in Kolkata in the 18th century.

With the speed at which the world is advancing in terms of technology today, reference work has also become easier. Today, codes are sent instead of passwords through the instant messaging app. So middlemen can easily do it in parallel with their business activities.

But why are these transactions done in secret?

Professor Alberto Prego Moreno says: "This is because sometimes the money is not declared. Sometimes (the consumer) wants to avoid paying taxes and he wants to make sure the commissions are kept to a minimum.

This is also because if a person traditionally wants to send money from the United States to his family in another country, he has to meet a number of demands.

If you use the banking system, you must have a certain amount of money. To open an account you need some documents such as your identity and your legal status there.

Other money transfer services can charge you up to 20% commission for international transactions. Either way, the user has to go through a number of regulations to prevent activities such as money laundering.

But there are not many such complications in reference.

"This is a very effective method because the money reaches the recipient relatively quickly and the commission has to be paid less," says Prego Moreno.

"It's important for the middle man to have a good network. The more contacts you have, the better your business will be. So you charge less and pay more. 

"It's important for the middle man to be reliable," he said. Earlier, usury was low and it was difficult for middlemen to make a lot of money. That is why this system spread so much in the Middle East and Asia. There are banking transactions in western countries but there is strict monitoring and control.

"In some places, people rely more on these middlemen than on the banks because it is the middleman's family and ancestral business that they consider more reliable than the banks," says Moreno.

Marina Martin, South Asia Legal History Coordinator at the Max Planck Institute in Germany, says: The method is different.

How big is the referral business?

The biggest advantage of the traditional referral system is that it is beyond the control of the government or international organizations to decide who is transacting the money. The fact is that there is little or no record of transactions, which is an obstacle to detecting money laundering.

It is believed that the 9/11 attacks in New York were also financed by terrorists in these unconventional ways. With the implementation of new and stricter laws, international transactions of a few thousand dollars have become even more complicated, not only in the United States but all over the world.

"In the aftermath of the 9/11 attacks, the United States sees the reference as a possible source of funding for terrorists," Martin said.

"References (and other unconventional methods) have been linked to many criminal activities over the years, from money laundering and political corruption to human organ trafficking," says Marina Martin.

A study by the Organized Crime and Corruption Reporting Project in 2018 found that a large number of foreign workers in Dubai were sending money to their families in countries such as India and the Philippines using unconventional systems such as hawala. It was stated that this amount is more than 240 crores.

In February 2016, the US Drug Enforcement Office (DEA) highlighted the links between Colombia and Hezbollah through money laundering and drug trafficking through Europe, saying that it involved millions of euros and millions of dollars worth of drugs. Has been traded.

According to DEA documents, millions of dollars worth of drugs were shipped to the Middle East via Lebanon and remitted to Colombia in euros.

In East Africa, especially in Somalia, arms smugglers use the reference to transfer millions of dollars.

According to the World Bank, there has been an increase in the number of migrant workers in developing countries sending money to help their families through remittances.

Despite the impact of the Covid-19 epidemic, remittances to low- and middle-income countries were estimated at around Rs 400 billion in 2020, according to official figures. This amount is only 1.6% less than in 2019. In 2019, this number was Rs 406.31 trillion.

However, the World Bank has also made it clear that "the actual size of remittances, which are delivered in both conventional and non-traditional ways, is much higher than official figures."

With a possible global recovery in the economy, remittances to low- and middle-income countries through traditional and non-traditional methods are expected to increase in 2021 and 2022, respectively.