Financial Crime World

Pakistan’s Financial Fraud Scandal: Khanani and Kalia International Acquitted Due to Lack of Evidence

In a surprising turn of events, the directors of Khanani and Kalia International (Pvt.) Ltd., along with four bankers, were acquitted of all charges related to the illegal transfer of funds from Pakistan to Afghanistan in March 2011 [1]. Below is a detailed account of the events leading up to this verdict and its aftermath.

Background

The Federal Investigation Agency (FIA) launched an investigation into the suspicious depreciation of the Pakistani rupee in July 2007, with the support of the Pakistani government [1]. In November 2008, the FIA conducted raids across Karachi, detaining more than a dozen individuals. Among them were Munaf Kalia, the CEO of Khanani and Kalia International, and ten officials of the National Database Registration Authority (NADRA) [1].

The suspects were accused of providing counterfeit identity cards to facilitate the illegal smuggling of US dollars outside Pakistan. Following the raids, Munaf Kalia was produced before the court of Omar Awan, judicial magistrate South Karachi on November 9, 2008 [1].

Exit Control List

The Special Civil Court of Lahore ordered that more than 14 individuals involved in the foreign exchange scam case be included in the Exit Control List (ECL) of Pakistan [1].

Timeline

  • November 2008: The State Bank of Pakistan suspended the license of Khanani and Kalia International for 30 days and debarred its head office and branches from conducting any business.
  • December 2008: The suspension was made indefinite.
  • August 2009: Another foreign exchange company, Zarco Exchange, faced similar allegations and had its license revoked.
  • February 2011: The Special Court (offences in banking) in Lahore allowed Zarco Exchange to request a revival of its license due to the lack of solid evidence.
  • April 2011: The company’s license was restored, enabling it to resume operations.

The Acquittal and its Aftermath

Despite the acquittal of the directors of Khanani and Kalia International, the FIA expressed dissatisfaction with the ruling and appealed to the Supreme Court to investigate [7]. Unfortunately, a separate action by the FIA against the acquitted individuals failed due to procedural mistakes that left crucial evidence missing from the court [8].

The Hawala Business and Pakistan’s Crackdown

The Pakistani government’s crackdown on the Hawala trade system was one of the actions taken during the foreign exchange scam investigation [9][10]. The Hawala system, an international network of currency dealers for making unrecorded payments, emerged as a significant challenge to investigators due to its clandestine nature.

References

  • [1] “Arrested money dealer admits link to forex scam – GEO.tv”. Archived from the original on 2008-12-11. Retrieved 2008-11-11.
  • [2] “Hawala case: Khanani and Kalia acquitted”. The Express Tribune. March 5, 2011.
  • [3] “The News International: Latest News Breaking, Pakistan News”.
  • [4] “Govt suspends Khanani & Kalia’s license – GEO.tv”. Archived from the original on 2008-12-09. Retrieved 2008-12-06. Jang Group of News
  • [5] “Man accused of illegal Rs67b transfer freed”. The Express Tribune. February 8, 2011.
  • [6] “Khanani and Kalia: Acquittal being investigated by SHC”. Khabrain. 2011-03-14. Archived from the original on 2011-03-16. Retrieved 2019-11-26.{{cite web}}: CS1 maint: unfit URL (link)
  • [7] “FIA set to lose another Khanani & Kalia case”. Dawn.com from the newspaper. April 17, 2011.
  • [8] “‘Hundi’ system to be smashed: Rehman | Pakistan | News | Newspaper | Daily | English | Online”. www.nation.com.pk. Archived from the original on 2009-01-08.
  • [9] “Hundi system to foil investigators”. USA Today. September 30, 2001.