KARACHI: Inspector Asfandyar Khan cuts a forlorn figure sitting in his office surrounded by stacks of folders. The towers of documents teeter precariously on the table and sofa where case files seem to be permanently parked. A generator drones on in the background but there is no electricity in the room where the door has been propped open by a chair.

As I wait for him to finish with his assistant, he orders tea in an accent that amplifies his Pashtun roots. His left hand is bandaged. Just as the assistant leaves for the day, he realizes that an important document that needs to be presented in court the next day is missing. A search ensues through racks and files and the absence of a filing system and digital records becomes conspicuous. Indeed, the graveyard of files and cupboards that line the corridors of this FIA office in Karachi just serve as a reminder that our investigative agencies have yet to fully embrace the advances of the 21st century.

In fact, Asfandyar Khan’s bandaged wrist is the outcome of a long fight against a crime that is perhaps older than the FIA itself: hawala hundi, a crude but entrenched way to transfer money bypassing banking channels in Pakistan. It has been the bane of the authorities as the global crackdown on money laundering and terror financing has ramped up.

The raid

On Monday evening, Inspector Khan led a team of four FIA officials to a shop on the fourth floor of a popular cell phone market in Saddar.

Khan, who moved to Karachi ten months ago after being posted to the Federal Investigative Agency’s Corporate Crime Circle, was working on information that a cell phone shop at Star City Mall was a front for a hawala/hundi operation.

They arrived at the shop at around 7:45pm as business was wrapping up for the day. But there was a buzz around shop No 403, located at a corner on the fourth floor of a building full of shops dealing in cell phones and accessories. Two men, identified as Fahim and Rizwan, ran the operation with three assistants.

The information about the hawala/hundi operation was validated, says Khan, as he and his team found several individuals at the shop to collect and deposit cash. They seized cash in excess of Rs10 million, at least 3,000 Saudi riyals and over a dozen cheque books.

The WhatsApp messages on the phones of the two men running the mobile shop showed messages and instructions of collection and pay-outs in lieu of amounts received in dollars and pounds.

Khan says he found ample evidence in the ten to 12 minutes he was able to question the two men running the shop and the people who had come there to conduct a transaction. Fahim and Rizwan’s response to his questions and the high amount of cash as well as the foreign exchange strengthened the suspicion. Questions over the amount of cash and cheque books received sketchy responses. The presence of riyals, a foreign currency, was a violation of the country’s Foreign Exchange Regulation Act, according to which only authorised forex dealers can do such transactions.

The team confiscated the multiple mobile phones and laptops along with the cash and cheque books while getting information from those who were at the shop to collect or deposit cash.

As Inspector Khan instructed the show-owners’ assistant to count the cash – a majority of it in bundles of Rs5,000 – he was offered a bribe.

“They told me to take some of the bundles. By that time, the assistant had counted that the amount was in excess of Rs10 million. They told me I could have Rs5 million there and then and no one had to talk about the raid ever again.”

Khan turned down the offer and asked them to sign the list of items seized. During this time, one of the assistants had sent an SOS to a few people.

Men started gathering outside the shop. They were led by Ilyas Memon and Mian Khalid, who claimed to be from the union of shop owners.

One of them told Khan he was related to an FIA officer and had contacts in the department. Khan didn’t budge, insisting that he would return to his office with the seized property and the suspects.

This is when the mood turned hostile. Khan says there were at least 20 to 25 men inside the small shop and hundreds outside. Soon people started shouting that the men were bandits pretending to be cops. Khan says that Memon and Khalid were responsible for provoking those gathered to the point where they debated whether to throw the team off the fourth floor.

One of the men claiming to be a union representative offered to hold on to the seized property while the FIA team was safely escorted downstairs. But Khan knew something was amiss.

At no point did the union leaders or the shopkeepers inform the police. By this time, the FIA team had, however, managed to get in touch with Preedy police station, confirmed by SHO Sajjad Ali. They informed the FIA team that backup was on the way.

“Now, they had realized that this would become a legal matter. This is when the situation turned violent. It started with pushing and shoving then fists were flying everywhere.” The scuffle lasted for a good 10 to 15 minutes in which he gave “as good as he got”. But the case property – the confiscated cash, cell phones, cheque books and laptops – were snatched from them and the two primary suspects (Rizwan and Fahim) were able to escape.

With the evidence and suspects gone, the FIA team was allowed to leave. When they were leaving, Khan found out that the elevator had been shut down while a crowd had blocked the stairs.

The entire episode lasted a little over an hour after which the team returned to the office. They then headed to the Preedy police station.

Asfandyar Khan says he will soon have the CCTV footage that will help them identify more people involved in the attack. But for now, it is the police that is responsible for the investigation.

Khan says there was reluctance on part of the police to register an FIR despite the fact that a government servant had been assaulted. Finally, a first information report (FIR) was lodged with various sections including 353 (using force to stop public servant from discharge of duty), 186 (obstructing public servant), 147 (rioting), 149 (unlawful assembly), 504 (intentional insult), 506 (criminal intimidation), 337 (intentional hurt) and 34 (common intention) of the penal code.

Fahim and Rizwan remain at large while the two men who claimed to be from the union are actually out on bail before arrest. All four men have been named in the FIR along with 25 to 30 unidentified individuals involved in the attack.

With no evidence, the FIA team couldn’t launch an investigation but they have initiated an inquiry, with the young inspector determined to crack the case.

Dollar manipulation and FATF

These raids are part of a larger crackdown by the FIA on hawala/hundi dealers as Pakistan tries to comply with the stipulations of the Financial Action Task Force ahead of its October meeting in which Islamabad expects it will be taken off the ‘grey list’.

A more recent development is the fluctuation in the rate of the US dollar, with the agency targeting money exchangers over the manipulation of currency supply and smuggling through hawala hundi channels following a government order.

On Tuesday, another raid was carried out at residence in Karachi’s Gurumandir. They arrested Ateeq Mehanti on charges of running a money exchange and hundi/hawala service.

The authorities seized Rs5.1 million in cash, USD$2,000, two cell phones and a laptop from the residence. They say that the laptop and cell phone contain detailed lists of hundi/hawala.

Three others - Abdul Hakeem, Nek Muhammad and Nazar Gul - were arrested in a different raid, from Balochistan’s Chaman on the border of Iran. Various currencies to the tune of Rs1.5 million were confiscated from the three accused.

While the currency fluctuation has immediacy, the issue of the grey list is of a longer-term concern to Pakistan. Pakistan was last placed on the FATF’s grey list in June 2018 with the anti-money laundering watchdog urging Pakistan to crack down on money laundering and increase fight against terror financing. This is Pakistan’s third appearance on the list, having being first placed on it in 2008 and then 2012. Each time, it was over worries of AML/CFT (anti-money laundering/countering financing of terror), with Pakistan removed in 2010 after enacting a permanent law. It spent another three years on the unwanted list for not being fully compliant with the standards for effectively addressing money laundering and terror financing.

In the June 25 plenary, the FATF issued a new six-point action plan for Pakistan to simultaneously address deficiencies identified in the 2019 Asia Pacific Group (APG) on Money Laundering Mutual Evaluation Report (MER).

The FATF has acknowledged that Pakistan has made significant progress on its stipulations, with the country hopeful of removal from the grey list following on-site inspections before the October plenary of financial watchdog.

To improve on-the-ground performance, Pakistan has notified eight new police stations, the AML/CFT Circles, to deal with the problem.

The AML/CFT police stations will deal specifically with cases that have sections of the anti-money laundering act. Hawala/hundi dealers have, in the past, been known to be complicit in channeling the proceeds of narco-businesses - including those from the Afghanistan-Pakistan opium trade. Scrutiny around the business increased in the wake of September 11.

Back in 2008, Javed Khanani and Munaf Kalia - the men running Khanani and Kalia, one of Pakistan’s biggest money changers - were arrested based on activity at one of their franchises in Punjab’s Gujranwala. At that time, K&K was responsible for almost 40 percent of the country’s money exchange transactions. Several other high-profile arrests were made in the case but most suspects got bail. The inquiry petered out for one reason or another to the point that after another acquittal in 2011, the then director of the FIA, Waseem Ahmed, suggested in public that the main accused had ‘used their resources’ to get away with a multi-billion dollar scam.

The officer resigned a month later. Another case was filed against Javed Khanani in 2015 after all previous cases were wrapped up. He was briefly detained and then released on bail.

Hawala and hundi

Hawala and hundi, often used interchangeably, are informal methods of money transfer that operate outside or on the fringes of modern banking. They have historically been preferred by South Asians for remittance and sending money across borders without a paper trail and at a fraction of the cost of normal banking channels.

Being illegal and outside the ambit of regulatory scrutiny, the system is open to exploitation – by money launderers as well as militant organisations who might use the channels for fund transfer. It is also among the action items given to Pakistan by the Financial Action Task Force, with Pakistan’s removal from the ‘grey list’ predicated on its performance against money laundering and terrorism financing.