Saturday, October 24, 2020

Convicted Money Launderer Altaf Khanani Had Close Ties to Top Pakistani Politicians

Convicted money launderer Altaf Khanani and his patrons among Pakistani politicians appear to have brought FATF's attention to Pakistan when the country was first put on its grey list back in 2012. A new national financial crimes bill was introduced by the ruling Pakistan People's Party which was so full of holes that a senior FIA official complained publicly it was "drafted by a money-launderer".  Khanani is believed to have moved over $12 billion a year of dirty money through Pakistani banking system. Altaf Khanani's 2015 conviction on money laundering charges by a US court and recent FinCEN files confirm that Khanani was a big time international criminal. Khanani has recently been released after serving a 5 year sentence in a US jail. His current whereabouts are unknown.  Pakistan was removed from FATF grey list in 2015 but it was back on it again in 2018. 


Pakistan on FATF Grey List

Who is Altaf Khanani?

Altaf Khanani is a member of Karachi's memon business community. Along with his twin brother Javed, he started their money-changing business under the name of Khanani and Kalia Inc (KKI) in 1984. By the 1990s, more foreign currency was passing through KKI than the banking system of Pakistan! By 1997 many governments were looking into KKI’s network but the twins were close to Pakistan's ruling elite. In 2008, Khanani brothers were charged with money laundering in Pakistan but later exonerated due to lack of evidence. FIA's appeal against their acquittals were rejected by the Sindh High Court as recently as 2019. However, a US court convicted Altaf Khanani of money laundering in 2015 and sentenced him to 5 years in jail. His brother Javed died in mysterious circumstances in 2016.  His death was labeled as suicide.  KKI partner Munaf Kalia now lives in Karachi. Altaf has recently been released from a US prison after serving his 5 year term. His whereabouts are unknown. 

US Report:

A 2017 US State Department report labelled the Altaf Khanani group as a money laundering organization (MLO) and said it laundered billions of dollars of dirty money. 

The 2017 US report said: “The Altaf Khanani money laundering organization (Khanani MLO) is based in Pakistan. The group, which was designated a transnational organized crime group by the United States in November 2015, facilitates illicit money movement between, among others, Pakistan, the United Arab Emirates (UAE), United States, UK, Canada, and Australia.” “There is a substantial demand for money laundering and illicit financial services due to the country’s black market economy and challenging security environment,” the report added. 

Australian Report: 

In 2007 and 2008 alone, Khanani's company  Khanani and Kalia's official banking records showed the company handled $2.3 billion, according to the Australian Federal Police. David Stewart, an assistant commissioner of Australian Police, said the Khanani's hawala-based operation was "turning over between 14 and 16 billion US dollars annually".

Pakistan FIA: 

In 2008, Pakistan's Federal Investigation Agency (FIA) alleged  that Khanani's company had illegally siphoned $US10 billion out of Pakistan. But few among the ruling politicians seemed to want to see the case proceed. "For fear of their own identities being revealed," Dawn newspaper columnist Khurram Husain said, "a very wide spectrum of very powerful interests mobilized in order to try and protect these [KKI] people." 

In 2010, a critical affidavit omitted the names of the very KKI directors who had been originally arraigned, according to ABC News. A new national financial crimes statute was introduced by the ruling Pakistan People's Party which was so full of holes that a senior FIA official complained publicly it was "drafted by a money-launderer". In 2012, a specially convened banking court acquitted the eight company officials, and in 2013, Altaf Khanani was also exonerated by the District and Sessions Court in Karachi.

Chaudhry Nisar:

In 2016, Pakistan's then Home Minister Chaudhry Nisar Ali Khan accused the Pakistan People's Party of being hand-in-glove with Khanani. He said: “During the tenure of the previous government, PPP officials had massively laundered money with the help of one of the biggest money changers, Khanani and Kalia, and later destroyed the evidence". 

“Billions of rupees had been laundered by the currency dealer in connivance with people in the then government. On the direction of ‘these people’ the record had been destroyed and now I am looking for this record,” Nisar added.


British Crime Agency Report:

In its 2018 annual assessment of serious and organized crime, the British National Crime Agency named Pakistan among the top 3 sources of money laundering. It said: “Investment in UK property, particularly in London, continues to be an attractive mechanism to launder funds....As the UK moves towards exiting the EU in March 2019, UK-based businesses may look to increase the amount of trade they have with non-EU countries....We judge this will increase the likelihood that UK businesses will come into contact with corrupt markets, particularly in the developing world, raising the risk they will be drawn into corrupt practices.”

Here are some of the key excerpts of the UK NCA report titled "National Strategic Assessment of Serious and Organized Crime 2018":

1. "The UK is a prime destination for foreign corrupt PEPs (politically exposed persons, a euphemism for politicians and their family member) to launder the proceeds of corruption. Investment in UK property, particularly in London, continues to be an attractive mechanism to launder funds. The true scale of PEPs investment in the UK is not known, however the source countries that are most commonly seen are Russia, Nigeria and Pakistan".

2. "The overseas jurisdictions that have the most enduring impact on the UK across the majority of the different money laundering threats are: Russia, China, Hong Kong, Pakistan, and the United Arab Emirates (UAE). Some of these jurisdictions have large financial sectors which also make them attractive as destinations or transit points for the proceeds of crime." 

End UK Safe Haven:

 Some have called London the "Money Laundering Capital of the World" where corrupt leaders from developing nations use looted wealth from their people to buy expensive real estate and other assets. Private individuals and businesses from poor nations also park money in the west and other off-shore tax havens to hide their incomes and assets from the tax authorities in their countries of residence.

Daniel Bruce, the head of Transparency International UK, has recently called on the British government to act against corrupt politicians who have found safe haven in London. Here's what he told the Financial Times:  “Foreign politicians with convictions relating to corruption should not enjoy impunity in Britain. Nor should their unexplained wealth, stashed in luxury London properties, fall out of the reach of law enforcement. The UK government should work constructively with democratic countries such as Pakistan to uphold the rule of law. Action should also be taken to seize and return illicit assets held here in Britain in order to deliver justice for the victims of corruption. Failure to act on cases such as this, earns the UK an unwelcome reputation as a safe haven for dirty money.”

Terror Financing: 

FATF may have been used against Pakistan as a political tool of the imperial powers. It may turn out to be a blessing in disguise to help document Pakistan's vast underground economy, cut rampant financial corruption and reduce widespread tax evasion. The loopholes in laws and systems that permit money laundering are used by corrupt politicians, businessmen and the terrorists alike. FATF is asking for these loopholes to be closed. Closing these loopholes will help Pakistan's economy and help fight terrorism at the same time. Recent anti-AML legislation passed by Pakistan's parliament is good start.

Summary:

Pakistan first came on the radar of the Financial Action Task Force (FATF) in 2008 when reports emerged that Altaf Khanani, Pakistani foreign exchange dealer, was moving over 12 billion US dollars a year of dirty money from Pakistan via Dubai. Pakistan's Federal Investigation Agency (FIA) filed charges against him that did not result in conviction when powerful politicians ordered key evidence destroyed. Later, a new national financial crimes bill was introduced by the ruling Pakistan People's Party which was so full of holes that a senior FIA official complained publicly it was "drafted by a money-launderer". As a result, the FATF decided to put Pakistan on its grey list in 2012.  Altaf Khanani's 2015 conviction on money laundering charges by a US court and recent FinCEN files confirm that Khanani was a big time international criminal. His brother and business partner Javed died in mysterious circumstances in 2016. Javed's death was ruled as suicide.  KKI partner Munaf Kalia now lives in Karachi. Altaf has recently been released from a US prison after serving his 5 year term. His whereabouts are unknown. Pakistan was removed from FATF grey list in 2015 but it was back on it again in 2018. 

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8 comments:

Anonymous said...

Pakistan to remain on global terror financing ‘grey’ list. Separately on Friday, Iceland and Mongolia were taken off FATF’s list of countries under increased monitoring.https://aje.io/atf56 via @AJEnglish

Riaz Haq said...

FATF may have been used against Pakistan as a political tool of the imperial powers. I hope it turns out to be a blessing in disguise to help document Pakistan's vast underground economy, rampant #corruption and widespread #tax evasion. Recent anti-AML legislation is good start.

Shafqat Akhund said...

I think FATF is not concerned with money laundering per se. It's focus is on terror financing. IK government and its supporters are using FATF censures to divert the attention towards laundering of corruption money while saving the actual parties who generate off-the-book funds and finance good Taliban and groups like Jhangvi

Riaz Haq said...

SA: "I think FATF is not concerned with money laundering per se. It's focus is on terror financing."

The loopholes in laws and systems that permit money laundering are used by corrupt politicians, businessmen and the terrorists alike. FATF is asking for these loopholes to be closed.

CZ said...

Spot on.

Another PPP accomplishment. They are economic hitmen, ruiners of Pakistan.

samir sardana said...

There is an INTRICATE,CAUSATIVE AND FUNDAMENTAL LINK between Politicians and Money Launderers and Industry ! That also explains Y Politicians love the mining,steel and sugar industry in Pakistan and all over the world - including to Hindoosthan.

Several Indian Industries are designed for black money generation and money laundering ! dindooohindoo

The INDIAN Steel unit is an IDEAL MODE OF RAISING CASH and MONEY LAUNDERING w/o limit ,even w/o mining activities – and the same MODUS OPERANDI applies to Pakistan also

• Steel was subject to ED (Excjse Duty), which is a MODVAT able tax

• In a 20 million tons steel plant,2-3 % of production can be explained to the state as wastages, yields, input mix issues,variation in power factor ,deviations in material quality,vagaries of supply chain,production mix etc.
o 2% of 20 million tons is 5,00,000 tons,and the steel unit will NOT record that production in the logs and that production will be met from CPP and not from Grid Power (as power is a proxy for output).This production will be sold OFF the books
• If 4-5,00,000 tons of steel, is sold in cash – there is enough cash generated by the steel unit – and the steel is sold, free of VAT, to a user,who does not need VATABLE steel (as his product is VAT exempt or his supply chain is financed by cash)
o If inputs are bought in cash,then more and more steel can be sold, in cash –as the sales HAVE TO BE OFF THE BOOKS OF ACCOUNTS
The Steel unit makes the ED/GST invoice of the 5,00,000 tons of steel,for steel which has been sold already in cash (This is a paper sale – there is no movement of steel)
o THE ED/GST invoice (of the 500000 tons) is then sold by the steel unit,to a steel user, WHO CAN AVAIL OF THE VAT BENEFIT – AT SAY,40% OF THE VALUE OF THE VAT/GST INVOICE
THIS STEEL USER IS ACTUALLY USING STEEL BOUGHT IN CASH (but in the past he has recorded some steel product sale, like say a steel gate, in the books as a ED/VATable sale.TO OFFSET the VAT on that Sale – the steel user is BUYING this ED/VAT invoice from the Steel maker).If the steel user is buying a VAT component in an invoice of Rs 1 crore at 40%, he is paying Rs 40 lacs and using Rs 1 crore VAT credit to offset from HIS VAT LIABILITY – A super profit business ! Buying and Selling Paper)
• THE STEEL USER MAKES A WIRE TO THE STEEL MILL, AND THE STEEL MILLS PAYS THE CASH TO THE STEEL USER, FOR THE BASIC STEEL PRICE BILLED
• THE CASH PAID TO THE STEEL USER BY THE STEEL MILL, IS GENERATED FROM THE 500,000 TONS OF STEEL, SOLD IN CASH
o THIS SYSTEM OF TRADING IN CASH AND TRADING IN GST AND TDS INVOICES, IS A METHODOLOGY DEVELOPED BY MARWARIS, AND THE TAX POLICIES OF THE STATE, HAVE BEEN MADE, TO ALLOW AND PERPETUATE THESE METHODOLOGIES

Which is Y Nawaz found VALUE in the Jindals

Riaz Haq said...

#US says #Pakistan has made significant progress on #FATF's first action plan. #Islamabad has managed to avoid the 'black list', for which it needs the support of 3 countries. #China, #Turkey & #Malaysia have been its consistent supporters. https://in.news.yahoo.com/us-says-pakistan-made-significant-002053427.html?soc_src=social-sh&soc_trk=tw&tsrc=twtr via @YahooIndia

Washington, Jul 20 (PTI) Pakistan has made significant progress on its first action plan of the Financial Action Task Force (FATF) by largely addressing 26 of the 27 action items, the US has said.

It has also urged Pakistan to swiftly complete the remaining action item by demonstrating that terrorism financing, investigations and prosecutions target senior leaders and commanders of UN-designated terror groups.

At its virtual plenary meeting last month, the FATF had retained Pakistan on its 'grey list' for failing to check money laundering, leading to terror financing. It had also asked Pakistan to investigate and prosecute UN-designated terrorists based in the country like Jaish-e-Mohammad (JeM) chief Masood Azhar and Lashkar-e-Taiba (LeT) founder Hafiz Saeed.

The global body against money laundering and terror financing had also asked Pakistan to work to address its strategically important deficiencies.

At his daily news conference on Monday, State Department spokesperson Ned Price said, 'We do recognise and we support Pakistan's continued efforts to satisfy those (first action plan) obligations. Pakistan has made significant progress on its first action plan with 26 of 27 action items largely addressed.' 'We encourage Pakistan to continue working with the FATF and the international community to swiftly complete the remaining action item by demonstrating that terrorism financing, investigations and prosecutions target senior leaders and commanders of UN-designated groups,' he said.

In response to a question, Price said the US encourages Pakistan to expeditiously work on its new second action plan.

Pakistan was placed on the 'grey list' by the FATF in June 2018 and was given a plan of action to complete by October 2019. Since then the country continues to be on this list due to its failure to comply with the FATF mandates.

With Pakistan's continuation on the 'grey list', it is increasingly becoming difficult for the country to get financial aid from the International Monetary Fund, World Bank, Asian Development Bank and the European Union at a time when it faces a precarious financial situation.

Islamabad has managed to avoid the 'black list', for which it needs the support of three countries. China, Turkey and Malaysia have been its consistent supporters. PTI LKJ DIV DIV

Riaz Haq said...

India's admission on FATF politicisation vindicates Pakistan's stance: FO

https://www.dawn.com/news/1635854/indias-admission-on-fatf-politicisation-vindicates-pakistans-stance-fo

A day ago, India's Minister for External Affairs S Jaishankar said the Bhartiya Janata Party (BJP) government led by Narendra Modi ensured that Pakistan remained on the 'grey list' of the Financial Action Task Force (FATF), Hindustan Times reported.

“Due to us, Pakistan is under the lens of FATF and it was kept in the grey list," Jaishankar was quoted as saying while addressing a virtual training programme on foreign policy for BJP leaders.

He added: “We have been successful in pressurising Pakistan and the fact that Pakistan's behaviour has changed is because of pressure put by India by various measures.”

During the session, the minister also credited the Indian government’s efforts "through the United Nations" for sanctions on proscribed organisations such as Lashkar-e-Taiba and Jaish-e-Mohammed, according to the report.

FATF assessment of Pakistan
The FATF had on June 25 announced that Pakistan will continue to remain on the watchdog's "increased monitoring list" till it addresses the single remaining item on the original action plan agreed to in June 2018 as well as all items on a parallel action plan handed out by the watchdog's regional partner — the Asia Pacific Group (APG) — in 2019.

---------

The Foreign Office (FO) said on Monday that the Indian foreign minister's statement that the Narendra Modi government had ensured Pakistan remained on the Financial Action Task Force (FATF) grey list had vindicated Pakistan's longstanding stance on "India's negative role" in the global financial watchdog.

The FO said the India foreign minister's statement had exposed India's "true colours" and "duplicitous" role.


"Pakistan has always been highlighting to the international community the politicisation of FATF and undermining of its processes by India. The recent Indian statement is just further corroboration of its continued efforts to use an important technical forum for its narrow political designs against Pakistan.

"While Pakistan has been sincerely and constructively engaged with FATF during the implementation of the action plan, India has left no stone unturned in casting doubts on Pakistan’s progress through disgraceful means," said the FO statement.

It said Pakistan would continue exposing India's role to the international community by bringing the recent "confession" to the FATF's and international community's notice.


It added that Pakistan was also considering approaching the financial watchdog for "appropriate action" in the matter.

"Following the recent confession by [the] Indian government, India’s credentials for assessing Pakistan in FATF as co-chair of the Joint Group or for that matter any other country are subject to questions, which we urge FATF to look into," the statement said.

The FO said Pakistan's "immense progress" in Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) had been demonstrated through "concrete, tangible and verifiable actions" that were acknowledged by FATF.

"We are resolved to sustain this momentum and trajectory with the support and cooperation of our international partners. India’s delusions of putting pressure on Pakistan have always remained unfulfilled and would never see the light of day.