AFGHANISTAN MONEY

FOLLOW THE MONEY: The U.S Treasury Department has been investigating the role of ’s traditional money markets, such as this one in Kandahar city, in funding the insurgency. REUTERS/Ahmad Nadeem Washington is trying to starve the insurgency of funds before handing over to Afghan forces in 2014 Stalking the Taliban’s banker

By Matthew Green KANDAHAR, Afghanistan, December 13, 2012

n his own estimation, Haji Khairullah Barakzai is the ultimate Afghan success story, an illiterate village boy-turned-currency ty- Icoon who became fabulously rich thanks to a lifetime of hard work, unerring street smarts and God’s favour. To the U.S. Treasury Department, he is one of the biggest bankers to the Taliban, the architect of an underground network that converts

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Trust funds The hawala network is an ancient trust-based financial system for transferring money used in much of the Islamic world.

STEP 1 STEP 2 STEP 3 In Country A... By phone, email or messaging... In Country B...

Sender Hawaladar A Hawaladar A Hawaladar B Hawaladar B Recipient The sender finds Hawaladar A to send Hawaladar A relays the code and the The recipient gives the number code to $XX to a recipient in Country B. The remittance amount to his counterpart Hawaladar B, who gives him cash from sender hands over the cash and gets a in Country B. The sender also relays the his reserves. The $XX debt is between number code. number code to the recipient in Country the two hawaladars and will be settled NOTE: Hawaladar = hawala operator B. Hawaladars are often linked by family by future transactions or a reciprocal Source: Interpol ties in communities across the world. remittance.

opium grown in the poppy fields of his na- declared guilty without any verdict from a disrupting their businesses. tive southern Afghanistan into cash. judge,” he said, speaking by telephone from Proponents say the strategy is a smart On June 29, the United States and Quetta, the city in southwest Pakistan that way to raise the pressure on insurgents United Nations slapped an asset freeze is his adopted home. without putting troops at risk. A Reuters on Khairullah and his 25-year-old money The showdown between Khairullah and reconstruction of the hunt for Khairullah’s transfer business, firing the opening shots his pursuers opens a rare window into an- presumed millions points to some of the in a widening but little known campaign to other kind of war, where financial intelli- pitfalls, however. starve the insurgency of drug money ahead gence trumps firepower, and captured terri- Not only has the money merchant of a hand-over to Afghan forces in 2014. tory is measured in frozen accounts. stayed a step ahead of the authorities, his Since then, the patriarchal broker has It is a war which, so far, the West has listing has catalysed a broader resentment fought back, marshalling contacts, lobbying been losing. Milking money from the her- at the tendency of U.S. agencies to brand politicians and seeking an audience with oin trade, donors in the Gulf, and extortion Afghan businessmen as Taliban sympathis- President to try to shield rackets on NATO contractors, the Taliban ers without publishing evidence. a lucrative jumble of companies spanning has managed to increase its revenue to $400 The case also exposes the complexities Afghanistan, Pakistan and Dubai. million in the last Afghan financial year, ac- that confront investigators who venture “I am a businessman and a business- cording to U.N. estimates. into a forbidding ecosystem of illicit com- man is like a ram. Anyone in authority can With pressure building to find creative merce, where lines between officialdom and come and grab it by its neck and slaughter ways to contain the insurgency as foreign criminality blur, hand-written ledgers are it,” Khairullah told Reuters in his first in- combat troops withdraw, Washington has barely decipherable, and deceptively non- terview since the sanctions were imposed. renewed its campaign against the move- descript offices move mountains of cash. “My life has become hell. I have lost ment’s money men. In the money market in Kandahar, the my credibility and reputation. I have been birthplace of the Taliban, where turbaned PROVOKING RESENTMENT dealers haggle over bricks of well-worn Since sanctioning Khairuallah, the U.S. notes, Khairullah’s colleagues leapt to the Follow Matthew Green’s blog at: government has hit militant groups, defence of one of the most respected mem- blogs.reuters.com/matthewgreen Taliban commanders and currency deal- bers of their age-old fraternity. ers with a slew of sanctions in the hope of “When we went to his office, we only

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saw people changing money or drinking tea or eating sweets,” said Haji Qandi Agha, a regal-looking trader who is president of the exchange. “There was no talk of the Taliban or heroin.” Agha gestured to a man with a close- cropped beard and embroidered skull cap who had just approached his counter. “For example, this man is sending money,” he said, after the customer produced a sheaf of grubby bills from his waistcoat. “What if the government or America captures him and says he’s Taliban? Is it my crime?” The man, counting with deft thumbs, did not look up.

CANDY SELLER TO CURRENCY KING Khairullah’s journey onto the U.S. sanctions list began 50 years ago when he was born into a modest rural home in Afghanistan’s southern Helmand province. POPPY PIPELINE: Some of the estimated $400 million that the Taliban raised last year comes from a Never taught to properly read or write, cut of the opium harvests in Afghanistan. REUTERS/Parwiz his entrepreneurial streak emerged during his boyhood years when he began selling sweets from a handcart, according to two couldn’t even have raised 100,000 rupees Afghanistan supplies about 90 per cent politicians from the region. ($1,000) back then. But God bestowed me of a $68 billion global market for illegal Khairullah said he built his empire by with two eyes to see and a mind to think.” opiates, much of which is exported via using profits he earned from trade to buy Current and former officials ascribe Pakistan. In 2012, the farm-gate value of properties which grew exponentially in Khairullah’s wealth to a different source: opium, heroin’s key ingredient, accounted value after the Taliban was overthrown in Afghanistan’s burgeoning heroin trade. for 4 percent of Afghan GDP, or about 2001. He diversified into scrap metal and “He is one of the biggest fish in the re- $700 million, according to U.N. data. rice trading businesses in Pakistan and gion,” said General Khodaidad (one name), “NO ONE CAN TOUCH HIM” owns a freight transport company in Dubai. Afghanistan’s counter-narcotics minister In Kandahar, Khairullah’s reputation for from 2007 to 2010. The accusations against Khairullah date wealth is leavened by his commitment to A source in Pakistan’s Anti-Narcotics Force back to the austere era of Taliban rule in the charity. He has helped mobilise relief for also suspected Khairullah of involvement in late 1990s, when he mingled with a coterie both Pakistani earthquake survivors and drug trafficking. “He is rich and resourceful, of heroin exporters who thrived under the Afghan villagers tormented by frostbite therefore no one can touch him,” he said. patronage of Mullah Mohammed Omar, during harsh winters. the movement’s enigmatic leader, accord- But above all, Khairullah is known as a king ing to two sources from Kandahar. of the hawala trade – the trust-based money “He became close to the Taliban,” said transfer system used in much of the Islamic one of the sources. “He bought drugs and world that pre-dates the time of the Prophet $700 million sold them and made lots of money.” Mohammed. U.N. officials say his network The source added that he had seen The estimated farm-gate value of of more than a dozen currency counters span Khairullah visit Mullah Omar’s compound Afghanistan, Pakistan, Dubai and Iran. opium in Afghanistan in 2012 in Kandahar city perhaps 20 times before “It is true that 35 to 40 years ago I the Taliban was toppled, forcing many of had nothing,” Khairullah said. “Maybe I Source:The United Nations its commanders to flee to Quetta, where

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Khairullah now lives. Drug money “When we saw this thing on the news In 2000, a year before his ouster, Mullah High opium prices are likely to benefit – that we were blacklisted – we were Omar banned poppy, causing opium pric- the Taliban, who raise millions of dollars shocked,” Esmatullah said. es to skyrocket and making fortunes for each year from trafficking opiates. This “LOST HIS WAY” Khairullah and others who had amassed year’s crop in Afghanistan is worth an stockpiles, according to a member of estimated $700 million. Any hope Khairullah may have had of keep- Kandahar’s provincial council. ing the sanctions quiet was shattered when Khairullah, who denies ever meeting AFGHANISTAN OPIUM PRICES Afghan television broadcast reports of his Avg weighted farm-gate price at harvest Mullah Omar, said the reports he dabbled listing on the Treasury and U.N. websites. in the drug business were concocted by his $500500 per kg Like Western banks, hawala dealers run Fresh opium business rivals. highly leveraged businesses with paper com- $425 Dry opium “I will be here five years from now, 10 mitments many times larger than the cash they All-time high years from now or 15 years from now,” he 400 hold. Shocks can tip them into bankruptcy. said. “If they can prove their allegations $350 Khairullah had faced an earlier crunch against me with concrete evidence then in 2010 after several of his partners in- 300 they can and should hang me for it.” curred huge losses. The sanctions prompted a new crisis as hundreds of his remaining “IRON TRIANGLE” 200 clients scrambled to retreive their funds. For much of the West’s 11-year campaign, “People who would deposit their money the art of tracking insurgent finance was a ne- with me for years are now standing outside glected discipline at the headquarters 100 my door,” Khairullah said. of ISAF, the NATO-led force in Afghanistan. Within days of his designation by the The issue began to receive more atten- U.S. Treasury Department, Khairullah had 0 tion in 2010 as part of a shake-up of the war '02 '04 '06 '08 '10 '12* driven 200 kilometres (124 miles) from effort under U.S. President Barack Obama, Kandahar to Quetta, an ISAF official said, who tripled the number of American NOTE: *2012 = Jan to Sept only. dodging a U.N. travel ban that should have troops in Afghanistan. Source: U.N. Office on Drugs and Crime barred him from entering Pakistan. He Investigators suspect Khairullah stands at then worked the phones. the centre of an “iron triangle” locking hawa- Haji Najeebullah Akhtary, president of la dealers, heroin traffickers and insurgents conventional bank, allowing Taliban lead- Kabul’s Sarai Shahzada currency market, into an increasingly profitable symbiosis. ers in Quetta to make monthly payments was among the first to receive a call. Taliban commanders would hand over to fighters in Afghanistan. “Immediately, he called me and said opium taxed from poppy growers at his “As of 2010, Khairullah was a hawaladar, he was going to meet President Karzai,” shops in farming communities in return for or hawala operator, for Taliban senior lead- Akhtary said. instant payments, a Western official said. ership and provided financial assistance to Although Karzai often receives elders “He would take opium and give you the Taliban,” the Treasury said. nursing grievances against ISAF, he did not cash,” he said. Khairullah denies the allegation, but, meet Khairullah. Instead, Karzai ordered Khairullah would then gather bulk like other hawaladars, said he could not be security chiefs to examine a file on him quantities of opium in hidden storehouses expected to always know the true identity compiled by the central bank, a presidential to sell to smugglers, the official added. of his clients. “It is not written on some- spokesman said. U.N. and U.S. officials believe his ha- one’s forehead that he a member of the Khairullah also sent another relative wala shops also served insurgents like a Taliban,” he said. to Afghanistan’s National Directorate of Esmatullah Helmand, a Khairullah rela- Security intelligence agency in Kabul to REUTERS TV tive who runs his Kabul branch, said that ask why he had been sanctioned, an NDS far from being in cahoots with the insur- official said. See the video: gents, his boss had feared being targetted The NDS suggested it work with the http://link.reuters.com/vab64t for moving money on behalf of trucking family to investigate the U.S. claims and in- companies supplying ISAF. form Washington if they were unfounded,

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but the relative declined the offer, the of- “A couple of months prior to the sanc- whereabouts of Khairullah’s elusive hoard, ficial added. tions, he had stopped transferring money U.S. Deputy Assistant Secretary for Mullah Sayed Mohammed Akhund, a via these accounts,” said Mohammad Terrorist Financing and Financial Crimes law-maker from Kandahar and a long-time Mustafa Massoudi, FinTRACA director- Luke Bronin boarded a plane for Karachi, friend of Khairullah, also fielded frantic general. “He must have had some tip-off, Pakistan’s commercial capital. calls from the fretting trader. some knowledge that it was coming.” Pakistan has often bristled at pressure to “I guarantee that he hasn’t paid even Nevertheless, Khairullah was forced to crack down on insurgents, but U.S. officials one penny to the Taliban,” Akhund said in start auctioning property to appease his say they consulted closely before announc- Kabul. “He has lost his way and he doesn’t creditors. A real estate agent in Kandahar ing the sanctions on Khairullah, his busi- know what to do.” said an agitated-looking Khairullah had ness partner Haji Abdul Sattar Barakzai, visited him in August to try to cut a quick and HKHS, their hawala company. TIP-OFF deal to sell 24 plots in a new development Bronin emphasised the need for As Khairullah worked his contacts, on the edge of the city for $360,000. Pakistan to take steps against Khairullah the Afghan financial intelligence unit, “His face told me he was very worried,” and his companies to senior Pakistani fi- FinTRACA, moved to freeze his assets. the agent said. nancial officials in Karachi and Islamabad Although hawala dealers like Khairullah As Afghan officials pondered the in early September. keep much of their money in a parallel sys- “They have been designated not only by tem of virtual obligations, the biggest play- I think it’s extremely unfair the U.S. but also by the United Nations,” ers must use banks to settle transfers. to attack people for something Bronin told Reuters. “So we have every ex- When the blocking orders arrived, that everybody is doing. pectation that Pakistan will take the neces- Afghan lenders told FinTRACA that sary steps to shut them down.” his accounts only held the equivalent of Mahmoud Karzai Pakistan’s central bank says it routinely $20,000, a fraction of the sums he is be- Kandahar property developer and implements U.N. freeze orders, but does lieved to have been moving. brother of Afghan president not divulge details on individual cases. In Quetta, Khairullah appears to op- erate unimpeded, working from an un- marked first-floor office guarded by a metal door opposite a motorbike repair shop. Investigators marvel at his continued abil- ity to raise six-figure dollar sums in cash. “BASELESS PROPAGANDA” In Kabul, too, Khairullah may be far from finished. His biggest coup came courtesy of the Afghanistan Chamber of Commerce and Industries (ACCI), the country’s leading private sector lobby group. Esmatullah, the Kabul manager, carries a “golden” member- ship card. The ACCI has been sharply critical of U.S. authorities for publicly naming sus- pected Taliban supporters without submit- ting evidence to Afghan courts. “They are destroying the image of indi- viduals and businesses,” said Mohammad TACKLING THE TALIBAN: the United States is turning over the battle against the Taliban insurgency Qurban Haqjo, ACCI president. “In other to Afghan forces as it focuses on shutting down the source of its funding. REUTERS/Goran Tomasevic countries, nobody is allowed to do that.”

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The ACCI wrote to Afghanistan’s for- sanctions on him and his Rahat company. Khairullah’s counter. A storefront sign em- eign ministry in October urging it to raise Dealers in Kandahar’s exchange say they do blazoned with his name had been effaced the issue of the “baseless propaganda” not even know where he is being held. with blue paint. Only a Koranic inscription against Khairullah with the U.S. embassy. Not every case is cast-iron, however. above the door had been left untouched. It The provincial council in Kabul also wrote Haji Agha Jan, another Kandahar dealer, read: “And God is the Best of Providers.” to the ministry on Khairullah’s behalf. said he was detained last year for 25 days “The Americans and the United Nations until ISAF seemed to conclude that he Additional reporting by Mirwais Harooni, have persecuted me,” Khairullah said. “They posed no serious threat. Hamid Shalizi, Jessica Donati and Abdel Aziz will have to compensate me for my losses.” “Everything is done on a phone call and Ibrahimi in KABUL, Mahmoud Habboush in a handshake,” a U.S. official said. “The re- DUBAI and Jibran Ahmad in PESHAWAR, “BEST OF PROVIDERS” cord system or the paper trail that allow you Editing by Bill Tarrant Fuming at his adversaries from his sanctu- to connect the dots is not as clear as the ary in Quetta, Khairullah seems anxious as Western system.” FOR MORE INFORMATION well as angry. A fellow hawala merchant For U.S. forces, the fact that Khairullah is Matthew Green, special correspondent, in Kandahar, Haji Mohammed Qasim, sweating harder is a victory of sorts, despite Afghanistan and Pakistan was arrested by Afghan and U.S. forces in the resentment sanctions cause. “He was [email protected] mid-September. dancing with the Taliban,” said the ISAF of- Bill Tarrant, Enterprise Editor The U.S. Treasury has since accused ficial. “It’s stupid to take on a client like that.” [email protected] Qasim of transferring millions of dol- On a recent afternoon in Kabul’s curren- Michael Williams, Global Enterprise Editor lars on behalf of the Taliban and imposed cy market, no customers called at shop 237, [email protected]

THE LONGEST WAR: The United States will withdraw the vast majority of its forces from Afghanistan by the end of 2014, winding down its longest war. REUTERS/Danish Siddiqui

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