Home Opinion Op-Ed Money Laundering, Suo Motus and Zardari

Money Laundering, Suo Motus and Zardari

Suo Motus
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Ali Tahir |

Two years ago, Javed Khanani jumped of the eighth floor of an under-construction building owned by himself. The police declared it as a case of suicide, but eight years before his death, his foreign exchange company Khanani and Kalia was accused of money laundering to Afghanistan. The fact was discovered after the Pakistani government sought the help of the American government into an unexpected free fall of the rupee. In the United States charges were brought against his brother Altaf Khanani in connection with the same money laundering network, and he was then sentenced to 20 years of imprisonment and a $250,000 fine.

In Pakistan the cases kept lingering on, only to result in acquittals, and the Director General of the FIA publicly bewailed that the judicial proceedings were managed, on which the Supreme Court took suo motu notice. The DG then resigned, and nothing came out of the suo  motu, as happens with a majority of the suo motu cases, it too turned into a file kept somewhere in the registry. After this, in one of his famous press conferences, the then interior minister Chaudhry Nisar also took notice of the acquittals and ordered a re-inquiry. The press flashed the statement of the minister for a few days, but again nothing changed.

A JIT cannot be formed for all cases that come before the Supreme Court, and in fact ignore the larger issue at contest, the competence of the trial courts to convict powerful individuals and provide effective deterrence.

Money laundering has its own perversions. The relationship between money laundering and terrorism financing is not unknown to the world. After the Army Public School attack, the Interior Ministry banned some non-governmental organizations and educational institutes because they were diverging their funds to finance terrorism. The nature of the crime of course was money laundering, and this was also picked up as a key point in the National Action Plan.

The FATF dilemma that Pakistan faces is a direct consequence of this nexus between money laundering and terrorism. Money laundering has taken hold in Pakistan, and despite assurances to both the domestic and global audiences, there has been institutional failure. Despite passing stringent laws to curb the menace, no government has been successful in implementing those laws through effective mechanisms. This has hurt the state deeply, including loss of life.

Read more: FIA requests formation of JIT in Supreme Court to probe money…

Due to the frail and feeble enforcement of the law, anti-state elements have taken full advantage of the administrative lapses and foreign intelligence agencies have been able to finance their operatives and proxies within Pakistan, see the curious case of Kulbhushan Yadav for instance. Only putting words to paper has never achieved anything, and Pakistan has set forth a comprehensive regime on money laundering and terror financing.

In this respect Pakistan set up its Financial Intelligence Unit in December 2007 through the issuance of the Anti-Money Laundering Ordinance, 2007  which came into force on the 4th of October 2007, and subsequently converted into a statute and renamed as  the Anti-Money Laundering Act, 2010. The Financial Monitoring Unit (FMU) was tasked with issuing regulations to constraint money laundering. Despite the issuance of such regulations, ineffective enforcement would eventually lead to the downfall of the regime, after all despite the regulations, the FATF placed Pakistan into the infamous grey list.

In the United States charges were brought against his brother Altaf Khanani in connection with the same money laundering network, and he was then sentenced to 20 years of imprisonment and a $250,000 fine.

Khanani and Kalia were accused of money laundering through smuggling US dollars out of the country, but this is not the only technique through which money laundering takes place. Some businessmen create trust organizations and launder their money as charity payments, others engage in round tripping in which organizations sell and buy assets to liquefy money and legitimate it and yet others launder money through control of banks. Money laundering through control of banks is vicious in nature, since money launderers under this technique become major shareholders in banks in states with weak anti-money laundering provisions or enforcement.

By gaining influence over the bank, they then launder money by breaching regulations and window dressing money laundering as usual bank transactions. When in late 2016, the Sindh government owned Sindh Bank announced that it will be taking over Summit Bank, concerns arose that some sort of malafide agenda was behind the takeover, owing to the rather unsavory reputation of the Sindh government.

Read more: Arrest warrants issued for Zardari in money laundering probe

The apprehensions on the bonafides of the deal manifested by the press lead to the Supreme Court taking cognizance of the matter. During the proceedings, the FIA dropped a bombshell. There was an ongoing investigation that pitched Summit Bank as a device for the money laundering operations of political and business bigwigs of Sindh. The suo motu took an interesting turn.

The Supreme Court was told that there are 29 allegedly fake accounts, and according to the FIA were used to window dress money laundering as legitimate transactions. The FIA alleges that these accounts were operated for the benefit of Asif Ali Zardari, Faryal Talpur, Hussain Lawai, Anwar Majeed and Nasser Abdulla Hussain Lootah among others. All of these personalities are inter connected one way or another. Hussain Lawai is an old friend of Asif Zardari, and spent a considerable time with him in exile. Hussain Lawai was also the CEO of the bank under investigation.

Due to the frail and feeble enforcement of the law, anti-state elements have taken full advantage of the administrative lapses and foreign intelligence agencies have been able to finance their operatives and proxies within Pakistan, see the curious case of Kulbhushan Yadav for instance.

Anwar Majeed is also a close associate of Zardari, and it is often alleged that he is the man in charge of Zardari’s commercial activities. Nasser Abdulla Hussain Lootah is the majority shareholder of the bank. It is alleged that the law was flouted on the directions of the CEO Hussain Lawai and the owner of the bank, Nasser Lootah. The amounts laundered are estimated to be in billions, and it has also surfaced that accounts at other banks are also under investigation.

There have been billions of rupees received from Bahria Town and the Omni Group, business entities considered very close to Zardari. Bahria Town has for example already irked the courts by a dubious transaction where government land was sold to it for dimes by the Malir Development Authority.  Then there were payments in billions paid out to the owner of the bank, Anwar Majeed and the Zardari Group owned by Asif Ali Zardari and Faryal Talpur. Most of these payments were shelved abroad. The legal criteria for money laundering was met.

Read more: Zardari, Faryal among others in money laundering probe: JIT

The Supreme Court, as it’s used to, ordered the creation of a JIT on the 5th of September. In June, the SECP issued the ”Anti Money Laundering and Countering Financing of Terrorism Regulations, 2018” in compliance with FATF recommendations, which are mandatory to adopt for Pakistan being a member of the Asia Pacific group on money laundering. These regulations supersede all earlier notifications which had separate anti-money laundering and countering financial terrorism requirements for financial institutions regulated by the SECP. Yet it does not seem to make much difference.

A JIT cannot be formed for all cases that come before the Supreme Court, and in fact ignore the larger issue at contest, the competence of the trial courts to convict powerful individuals and provide effective deterrence. The new regulations, while improved wouldn’t achieve much either, the real problem is not with the quality of the law, but with enforcement. That is how we have come to a stage, where money laundering and terrorism financing isn’t just hurting Pakistan, but complaints of other countries have come to the shore and have drawn global ire in the form of the FATF fiasco we currently face, with even strong foreign policy partners like Saudi Arabia and China voting against us.

It is imperative at this stage now to ensure that we do not stay trapped by the menace through the use of complex ownership structures of companies, partnerships or trusts. Pakistan faces significant risks if money laundering is not addressed as a top most priority, especially with regards to how it is connected to terrorism.

Ali Tahir is a barrister, who has an interest in Pakistani current affairs, economy, constitutional developments, foreign policy and international law. The views expressed in this article are author’s own and do not necessarily reflect the editorial policy of Global Village Space.


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