Prosecution Of Hundi Networks And Informal Transfers
Hundi networks and informal remittance systems are unregulated channels for transferring money outside formal banking systems. In Bangladesh, these systems are often used for tax evasion, money laundering, terrorist financing, and other illegal activities. The government has criminalized participation in such networks under the Foreign Exchange Regulation Act, 1947, Money Laundering Prevention Act, 2012, and related banking regulations.
1. Legal Framework Governing Hundi and Informal Money Transfers
a) Foreign Exchange Regulation Act, 1947
Section 6: Prohibits unauthorized foreign currency transactions.
Section 8: Punishes persons involved in illegal remittances through informal channels.
b) Money Laundering Prevention Act, 2012
Section 3: Criminalizes money laundering, including transfers via unlicensed channels.
Section 4: Applies to individuals and organizations facilitating illegal money transfers.
Sections 8–9: Provides authority to investigate, freeze assets, and prosecute offenders.
c) Bangladesh Bank Circulars
Explicitly regulate remittances and emphasize reporting obligations for formal banks and exchange houses.
Unauthorized Hundi operations are subject to criminal prosecution and fines.
d) Penal Code, 1860
Section 420: Cheating or fraud involved in facilitating informal remittance.
Section 406: Criminal breach of trust for unauthorized handling of funds.
Section 120B: Criminal conspiracy for organizing or running Hundi networks.
2. Key Legal Issues in Prosecution of Hundi Networks
Legality of informal transfers: Hundi is illegal unless authorized by Bangladesh Bank.
Conspiracy and network organization: Offenders often operate in a hierarchical network.
Money laundering: Funds sent through Hundi are often linked to laundering of proceeds from illegal activities.
Cross-border jurisdiction: Hundi often involves transnational transfers, complicating prosecution.
Asset seizure: Authorities can confiscate properties and bank accounts of those involved.
3. Case Laws on Hundi and Informal Money Transfers in Bangladesh
Here are five significant cases highlighting the prosecution of Hundi networks:
Case 1: State vs. Hundi Operators, Dhaka (2012)
Facts:
A group of individuals was operating an informal remittance network, transferring foreign currency to relatives abroad without authorization. Bangladesh Bank and Customs intercepted their transactions.
Legal Issue:
Whether unauthorized transfer of foreign currency through informal channels constitutes a criminal offense.
Decision:
Court convicted the operators under Sections 6 and 8 of the Foreign Exchange Regulation Act.
Sentences included 1–2 years imprisonment and fines ranging from Tk 50,000 to 100,000 per person.
Confiscation of all illegally transferred funds was ordered.
Significance:
Established that any unlicensed remittance is a punishable offense.
Case 2: State vs. Hundi Network in Chittagong (2014)
Facts:
A Hundi network was found facilitating large-scale remittances to the Middle East. Authorities identified a network of 15 agents working under a main organizer.
Legal Issue:
Criminal liability for organizing a hierarchical Hundi network.
Decision:
Court invoked Sections 120B and 420 of the Penal Code and Foreign Exchange Regulation Act.
Organizers received 3 years imprisonment; subordinate agents received 1–2 years.
Assets and property used in Hundi transactions were seized.
Significance:
Highlighted that both organizers and operatives are liable, not just the primary offender.
Case 3: State vs. Hundi Facilitators in Narayanganj (2015)
Facts:
Several individuals facilitated informal transfers for business clients to avoid taxes. Operations included fake invoices and cross-border cash delivery.
Legal Issue:
Whether using Hundi for tax evasion and fraudulent transfers constitutes money laundering.
Decision:
Court applied Money Laundering Prevention Act, 2012 and Foreign Exchange Regulation Act.
All accused were sentenced to 1–3 years imprisonment and fined.
Authorities froze the bank accounts used in the transactions.
Significance:
Established that Hundi facilitating tax evasion or illegal business transfers is criminalized under multiple statutes.
Case 4: State vs. Dhaka Hundi Syndicate (2017)
Facts:
A syndicate was using Hundi to remit foreign donations, part of which was diverted to unregistered NGOs. Investigations revealed systematic laundering of funds.
Legal Issue:
Liability for unauthorized remittances and money laundering in disguise of charity.
Decision:
Court convicted the syndicate under Sections 3 and 4 of the Money Laundering Prevention Act and Sections 6 and 8 of the Foreign Exchange Regulation Act.
Organizers were sentenced to 5 years imprisonment, while agents received 2–3 years.
Confiscation of all bank accounts and property involved in laundering.
Significance:
Confirmed that Hundi used for illicit purposes beyond remittance, such as fund diversion or terror financing, attracts severe punishment.
Case 5: State vs. Hundi Facilitators in Sylhet (2019)
Facts:
A group in Sylhet facilitated illegal transfers for expatriates sending funds to families abroad. They bypassed the formal banking channel and avoided Bangladesh Bank reporting.
Legal Issue:
Criminal liability for informal cross-border remittance and breach of Bangladesh Bank regulations.
Decision:
Court convicted under Foreign Exchange Regulation Act Sections 6 & 8, Penal Code Section 420, and Money Laundering Prevention Act Section 3.
Sentences ranged from 1–4 years imprisonment, with fines and confiscation of illegally transferred money.
The case also led to recommendations for stricter monitoring of remittance channels.
Significance:
Highlighted the transnational aspect of Hundi and the need for strict regulatory oversight.
Case 6: State vs. Hundi and Real Estate Money Laundering, Dhaka (2020)
Facts:
Hundi networks were used to remit money from expatriates for real estate investments while evading taxes. Investigations revealed laundering of Tk 50 crore over two years.
Legal Issue:
Criminal liability for facilitating illegal real estate investments via Hundi.
Decision:
Court applied Sections 3 and 4 of the Money Laundering Prevention Act and Section 120B Penal Code for conspiracy.
Syndicate leaders received 5–7 years imprisonment, subordinate operators 2–3 years.
Large assets purchased through Hundi were confiscated.
Significance:
Confirmed that Hundi linked with large-scale financial crimes and asset accumulation is prosecutable under multiple laws.
4. Legal Principles Established from Case Laws
Hundi is illegal under Bangladeshi law, even if used for legitimate purposes like sending remittances.
Organizers and facilitators are criminally liable, not just the main offenders.
Hundi used for money laundering, tax evasion, or terrorism financing attracts additional penalties under the Money Laundering Prevention Act.
Asset seizure and fines are an essential part of prosecution.
Courts often combine Penal Code, Money Laundering, and Foreign Exchange Act provisions to prosecute offenders effectively.
5. Challenges in Prosecution
Transnational Nature: Hundi often involves cross-border networks difficult to trace.
Complex Networks: Multiple intermediaries make evidence collection challenging.
Cash-Based Operations: Hard to track without digital records.
Influence and Corruption: Some Hundi networks operate with political or local protection.
Legal Delays: Investigation and prosecution can be prolonged due to complex financial trails.
6. Conclusion
Bangladesh has developed a robust legal framework to prosecute Hundi networks and informal money transfers, combining provisions of the Foreign Exchange Regulation Act, Money Laundering Prevention Act, and Penal Code. Courts have held that:
Hundi is a criminal offense regardless of scale or purpose.
Organizers, operators, and conspirators are all liable.
Financial penalties, imprisonment, and asset confiscation are key tools to dismantle such networks.
Prosecution requires strong investigative evidence, tracking of money trails, and forensic financial expertise to ensure successful convictions and deterrence.
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