Unlike the shabby tandoori restaurants and halal butchers in Lumb Lane, a former red light district, the Bradford Travel Agency oozes money.

Its smartly dressed staff serve customers from leather seats behind mahogany desks. Grand clocks show the time in Britain and Pakistan.

The reason for the luxury, it emerged this week, was that the agency was at the centre of a multinational money-laundering operation that used a traditional Islamic banking system to process more than £500 million of drug money.

A series of court cases that can be reported for the first time reveal how the fast-growing hawala system is used by criminal gangs to transfer money overseas.

The Times has learnt that hawala transactions also led to the murder of PC Sharon Beshenivsky, who was shot during a bungled robbery at another Bradford travel agency.

The revelations raise serious concerns about how hawala has remained almost entirely unregulated while other financial systems have faced ever increasing legal controls to prevent them from being used by criminals and terrorists. As far back as the 1980s, tax inspectors were aware of the risks from the hawala system.

Hawala brokers can be found at travel agencies, grocery shops and internet cafés on the high streets of almost every town with a sizable immigrant population. They are used by hundreds of thousands of immigrant workers legitimately to transfer money to family in Asia, China, Africa and Eastern Europe. But the lack of detailed record-keeping and financial controls have obvious advantages for criminals.

Revenue & Customs officers uncovered a huge criminal operation that laundered at least £500 million of criminal assets between 1997 and 2001.

Couriers collected hundreds of thousands of pounds each day from drug gangs in London, Manchester, Liverpool, West Yorkshire and Scotland, Leeds Crown Court was told. They delivered the cash to hawala brokers based at travel agents in Bradford, Birmingham and Halifax.

David Odd, the senior customs investigator in charge of the case, said: “Hundreds of thousands of pounds in dirty cash was being ferried up the M1 on an almost daily basis.”

The hawala brokers secreted the money away in their business and personal bank accounts before transferring it to Dubai. From there the money eventually disappeared into accounts in the United States, the Middle East, South America and Europe.

The Bradford Travel Centre laundered £42 million over three years. Shahid Bhatti, 45, the head of the family-run firm, took a 3 per cent commission for his labours and is now serving a three-year sentence for conspiracy to launder the proceeds of crime. Staff at the agency said that the business was still owned by the Bhatti family.

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