AFGHANISTAN MONEY FOLLOW THE MONEY: The U.S Treasury Department has been investigating the role of Afghanistan’s traditional money markets, such as this one in Kandahar city, in funding the Taliban 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 SPECIAL REPORT 1 AFGHANISTAN MONEY STALKING THE TALIBAN’S BANKER 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 Hamid Karzai 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 SPECIAL REPORT 2 AFGHANISTAN MONEY STALKING THE TALIBAN’S BANKER 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 of more than a dozen currency counters span The estimated farm-gate value of 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 SPECIAL REPORT 3 AFGHANISTAN MONEY STALKING THE TALIBAN’S BANKER 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.