$14b rogue traders

TWO directors of a leading foreign exchange company in Pakistan have been arrested for allegedly smuggling US$10 billion (S$14 billion) out of the country. The dealings of Javed Khanani and Munaf Kalia, directors of Khanani and Kalia International (KKI) have come under the spotlight as Pakistan desperately seeks US$5 billion this month to avert a looming bankruptcy amid the global financial crisis. Investigators from the Federal Investigation Agency (FIA) said the money would have been more than enough to help tide the country over the current monetary crisis. They also said that the illegal transactions had contributed to a devaluation of the rupee by more than 20 per cent. The two directors of KKI, which has branches across the country, were arrested over the weekend for 'illegally' transferring foreign currency abroad, Pakistani newspaper reports said. They have been charged with the 'physical transfer' of foreign currency from the country and running a 'hawala' or money-laundering racket. Investigators also confiscated copies of the identity cards of hawala clients as part of their probe. The FIA said it has a list of names of almost 70 political personalities, bureaucrats and businessmen believed to be involved in the racket. Investigators suspect these people transferred money to their children studying abroad and used it to pay instalments for expensive properties abroad. While Khanani was arrested in Lahore, Kalia was arrested in Karachi. Courts in the two cities yesterday extended their remands to facilitate further interrogation. Top FIA official in Lahore Azam Joya said preliminary investigations had revealed that the two directors shared 'equal and direct' responsibility for the 'illegal business'. He said Khanani and Kalia had carried out '40 per cent' of all money exchange transactions in the country. Pakistan's English-language Dawn newspaper reported from Lahore that two forensic experts had arrived in the city to analyse the company's computer records which had been seized by investigators. FIA director-general Tariq Pervaiz said: 'We are trying to retrieve the data through experts, as the suspects deleted the transactions on daily basis.' The computer is believed to contain records of illegal transfers to accounts in the Gulf, Europe and the United States. The Daily Times, quoting sources in Islamabad, said the government was considering seeking help from Interpol to arrest suspects 'not currently in Pakistan'. It said the Central Bank had been conducting a probe into the reasons for the sharp drop in the value of the rupee and had recently asked the government to crack down on companies involved in the illegal transfer of foreign exchange outside Pakistan. At the beginning of the year, the rupee was trading at 65 to the US dollar. Last month, it fell to a record low of 90 to the dollar. Pakistan also faces massive trade and budget deficits, plunging foreign currency reserves and capital flight. Foreign-exchange reserves cover just six weeks of imports.