by Ismat Sabir
The State Bank of Pakistan has frozen almost 90 to 100 accounts of the directors of Khanani and Kalia and closed relatives of owners. Another report shows that details of about 18,000 accounts were also found in the 20 computers seized from the offices and franchises of the company. Presently, the top brass of Khanani and Kalia are under the remand of FIA on illegally remitting the money outside the Pakistan.
But the notable point is that the actual culprits, i.e., the persons who have given the money to the money changers to transfer it abroad are yet to be identified. While the seized computers have complete addresses and whereabouts of the clients who used services of the company, so it would not be difficult to find out the actual responsible personalities.
Officials say Javed Kalia has named influential people whose money has been sent abroad but the problem is that these people are very influential, therefore, advisor to PM, Rehman Malik, had to state in the Senate that no lists was prepared that included names of certain politicians, businessmen or bureaucrats involved in the scandal neither any name had been put on the exit control list.
Instead of appreciating government's efforts, several opposition senators asked under which law, action was taken by FIA against the accused and why were they manhandled. A joint meeting of Forex Association of Pakistan (FAP) and Exchange Companies Association of Pakistan (ECAP) criticised the FIA's Lahore Circle for presenting some of the KKI directors handcuffed in Lahore Sessions Court.
Director FIA Crime Circle also had to assure that in future FIA would take the exchange companies' association into confidence before taking action against any exchange company and would be raided in the presence of SBP officials. Earlier the advisor stated that those indulged in this criminal activity are too powerful and influential, however, a green signal was given and action proceeded against them. He said the investigation was being carried out against seven money changing firms, but yet no action has taken against any other company.
The advisor also explained that the action was taken under Foreign Exchange Regulations Act 1947, as the accused had committed criminal acts and they could seek bail. It is to be noted that earlier certain powers transferred to the NAB, had been again given to FIA a week back, which was given a signal to its cyber crime wing to go after certain elements who were indulging the illegal activity.
According to the details, Lahore FIA officials prepared a special report about the flight of dollars from the country in April 2008, fearing that a forex crisis would hit the country in the near future. The report also recommended strong and instant action against persons involved in the Hundi and Havala business.
Lahore, Gujranwala, Karachi and Peshawar are the main cities where a majority of money changers were running the Hundi and Havala business and anyone could send any amounts any where in the world without any check.
A special team of the FIA's Crime Circle was constituted to take action. The agency has been ordered to collect more intelligence and that the crackdown against the Hundi and Havala business. This malpractice in foreign exchange dealing was going on for the last 5 to 6 years. The Government blamed that the money changers have developed a parallel internet banking system. Actually money changers never transferred the dollars or other currencies expatriate Pakistanis deposited with them.
Officials of the SBP and the government were expressing apprehension for quite some time about involvement of some money changers in the smuggling of dollars. It was estimated that money exchangers have transferred around $10 billion during the last five years from the country. On an average, they were transferring about $10 million every day through the Havala and Hundi system.
The accused also accepted that this smuggling had caused the slump in the shares business at local bourses. Since April 2008, the Karachi Stock Exchange has witnessed a 41 percent fall in its 100-Index. Moreover, the value of rupee against dollar was continuously going down, due to dollarization and open smuggling of dollars.
The money was being smuggled in big quantity, for instance, a Rs10 million bag was being sold for Rs1.10 million in Afghanistan in October. A probe was launched, which led to interception of $32 million at Lahore Airport. Such detections were also carried out in Peshawar and Karachi too.
The main currency market of Peshawar is at Chowk Yadgar where hundreds of Afghan refugees have also joined the activity with the locals. Any person, having cash amount of even Rs5, 000 to Rs 10,000 were also purchasing dollar to earn a little amount.
Currency dealers having agents in Jalalabad, Afghanistan, fixed price of the currency. Millions of dollars were being smuggled to Afghanistan daily, as there is no check on the movement of the currency from and into Pakistan. Rupee against dollar was sold at Rs90 in Peshawar on 28th October 2008.
The Afghan refugees traveling across the border at Torkham are the main source of currency smuggling that was not checked by any official agency. Neither the government took timely action for arresting depreciation of rupee.
On May 9, 2008, the SBP issued a warning to cancel exchange companies' licenses that fail to bring remittances into the country and also will disallow the export of currency notes. They totally ignored all these warnings and rupee further weakened from Rs66.88 to Rs67.50/67.70 to a dollar on the same day. For a long time SBP kept the PKR-dollar parity stable at $1 to PKR 60 to 62 and the cash transactions were normally within 30 to 40 paisas band.
On the other hand, the market players said the government is responsible for the slide down. They feel that SBP/government, after the April meeting with the IMF, in Washington, might agreed to weaken the rupee in order to control the widening trade and current account deficit by at least equal to the inflation differential. Therefore, the SBP allowed the rupee to slide by 30 to 40 paisa on a daily basis. This has encouraged the trend of polarization. The investors have shifted their focus from equities to the currency trade. Even the small savers and housewives jumped on this bandwagon.
The money changers made Rs4 billion annually through this illegal trade while the forex reserves are depleting rapidly. Authorities have identified a cartel whose illegal transaction of foreign currencies is aggravating the devaluation of the rupee against dollar. At one time, one US dollar reached Rs84 in the open market while bank rate was Rs81. Later, dollar was sold for Rs88 in the open market while bank rate was Rs84. There were also rumours that the government and the State Bank have agreed with the foreign agencies to drop the value of rupee to the level of Rs100 per dollar.
The unstable rupee has also causing problems for importers as their imported goods were lying at ports and banks were not releasing them dollars, therefore, they have to purchase it from the open market where dollar price rates was increasing every day.
In November 2004, when SBP was trying not to let the forex reserves go down below $10 billion on orders of then Prime Minister, Shaukat Aziz, similar threats and various administrative measures such as exporting currency only through NBP exchange company to plug leakages taken by the SBP did not work. In spite of several warnings exchange companies bring in less than one billion dollars in home remittances while the currency export was over $4 to $5 billion a year.
The SBP told money changers that unlike the exchange companies need a minimum paid-up capital of Rs100 million they can start operating as mini exchange companies with a minimum capital of Rs25 million only. The Bank also said if less than 80 percent of them do not opt for establishing 'B' category exchange it would cancel the very scheme that gives them this option.
Representatives of exchange companies were not happy at these instructions they said they will have to undergo a loss since the rupee has weakened more than the agreed rate with SBP.
There are 378 licensed money changers across Pakistan 109 of them operating in Karachi. The SBP had set June 30, 2004 deadline for them to stop operating as money changers, they were given the option to transform their business into new exchange companies or get franchise from the existing ones. But money changers were a bit averse to this idea and wanted to keep their own identity.
So the central bank finally allowed them to form mini exchange companies instead of becoming a part of the existing exchange companies or establishing new ones.
It also told them that at least five money changers should join hands to form one mini exchange company. Central bank said that the purpose of this requirement was to ensure that the majority of licensed money changers transform their businesses into exchange companies.
(To be continued) The writer is a senior journalist and researcher
Source: The Post
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