Journalist Gretchen Peters’ new book links Dawood Ibrahim to Afghanistan’s dirty money
We sat in a Dubai Cafe drinking cappuccinos while Riaz explained to me how the boss of South Asia’s underworld launders millions of dollars of Afghan drug money. “Every big player in dirty business will have a dozen guys like me to make their operations look clean,” Riaz explained. And he should know. For about a decade, Riaz laundered money for Dawood Ibrahim, the undisputed crime lord of South Asia.
Wanted in India for his role in the 1993 Mumbai blasts that killed over 200 people, and accused of smuggling massive narcotics shipments into the UK and Europe, Ibrahim has the dubious distinction of being the only person Washington has designated both a ‘Global Terrorist Supporter’ and a ‘Foreign Narcotics Kingpin’. The son of a police constable, Ibrahim started out as a small-time hood in Mumbai, graduating to extortion, murder for hire, and gold smuggling. He bought off Mumbai’s cops, and dabbled in Bollywood and fixing cricket matches. In 1984, he fled India for Dubai, where he transformed his D-Company gang into a global crime conglomerate. After the 1993 Mumbai blasts, even freewheeling Dubai wouldn’t have him anymore. Ibrahim took refuge in Karachi, reportedly under protection of the ISI.
That’s when D-Company began working in the region’s opium trade. Ibrahim “travelled in Afghanistan under the protection of the Taliban” in the late 1990s and brokered a financial arrangement to share smuggling routes with “Osama bin Laden and his terrorist network,” a US government fact sheet says. “If you want to understand what Osama bin Laden is up to,” a former senior CIA official told me, “you have to understand what Ibrahim is up to.”
Today, Ibrahim is believed to play a major role in laundering drug proceeds from the Afghan opium market. Like bin Laden, he remains at large, reportedly spending most of his time behind the high walls of a Karachi mansion. Around the globe, agents from India, Interpol, the CIA, the DEA, and the Treasury Department are building a case against him. “Dawood’s involvement in drugs and terrorism is undeniable,” a senior US official told me. Proving it won’t be easy. As Riaz explained it, moving dirty money is hardly rocket science. D-Company and numerous organisations like it use surprisingly simple techniques to make sure that drug and terror money slips past the notice of authorities.
Two weeks after the 9/11 attacks, President Bush gathered media in the Rose Garden to declare war on al Qaeda’s financing. “Money is the lifeblood of terrorist operations,” he said. “Today we’re asking the world to stop payment.” The following month, he launched Operation Green Quest, a law enforcement program to block terrorist funding. “The same talent pool and expertise that brought down Al Capone,” the Treasury Department boasted in a press release, “will now be dedicated to investigating Osama Bin Ladin and his terrorist network.” By December, the US government and allied nations had frozen the assets of 150 known terrorists, their organisations, and their bankers in the US and abroad, blocking about $66 million. But the trail of terrorist money quickly went cold. As of 2006, bank assets frozen by US authorities climbed to a little more than $300 million. “Compared to what’s sloshing around,” one federal official complained, “that’s a pimple on a pig’s ass.”…
Eight years after 9/11, the single greatest failure in the war on terror is not that Osama bin Laden continues to elude capture, or that the Taliban has staged a comeback, or even that al Qaeda is regrouping in Pakistan’s tribal areas and probably planning fresh attacks on the West. Rather, it’s the spectacular incapacity of western law enforcement to disrupt the flow of money that is keeping their networks afloat.
US financial crime agents have suspected that drug money was helping fund Islamic extremists since the 1990s, but there has been little systematic investigation into the links between drug profits and terrorism…
It’s easy to become discouraged when you start looking at the scope of the problem. The trading zone that groups Afghanistan, Pakistan, and the UAE is the financial world’s Wild West, where there are disincentives to going legal. Corruption is rife, law enforcement shoddy, and tax evasion the norm. The vast majority of payments—even legal ones—for big ticket items like cars and homes are made in cash, sometimes suitcases of it. Walk into any money-changing market from Kabul to Dubai and you will see dozens of hawaladars counting knee-high stacks of $100 bills, literally millions of dollars in cash. The hawaladars balance their accounts in grimy notebooks, but keep few records of who sent what to whom for authorities to scrutinise. No one has any idea how much they transfer across borders each year, not to mention how much of it is “legal”.
Since 2001, the UAE, Pakistan and Afghanistan have adopted or at least drafted laws banning money laundering and tightened regulations on bank transfers. However, there’s been limited success in tracking money flowing outside the banking system, and no effort to go after those appearing to break the law… Drug money flows along a different route than the opium, agents say, often bouncing through Russia and South Africa and usually passing through Dubai, the flashy free-trade emirate that’s a hub for money laundering and underground banking. The funding for 9/11 passed through Dubai, and Abdul Qadeer Khan’s network went there to flog nuclear technology…
For millions of people across the world with no access to bank accounts—most of them migrant workers—the informal money transfer network known as hawala is the cheapest, fastest, and easiest way to transfer money. In Afghanistan, where few banks operate outside Kabul, hawala is crucial to the legal economy.
A 2003 World Bank study calculated that international aid groups funneled $200 million in emergency, development, and reconstruction money through the hawala market after the fall of the Taliban. The informal transfer system is also heavily penetrated by drug dealers, criminals, and Islamic extremists, officials say.
Riaz, who used to move payments from D-Company’s gold smuggling proceeds, says, “Now all they do is launder drug money.”… Say Riaz wanted to transfer $100,000 from India to Dubai to pay off a gold shipment. Through trusted hawala agents he would locate a group of Indian labourers in Dubai who wanted to send their salaries back home to their families. Once the agent had put together $100,000 worth of wages, plus his 20 per cent commission, he would coordinate a “transfer” with another agent in India, and the two would simply zero their balance sheets. No money would ever cross borders, making it virtually untraceable.
The Indian migrant workers never knew they were tied to an illegal deal—not that records were kept anyway. Hawala operates on a basis of trust: the agents on either side of the transaction simply select a confirmation number, and the clients present that number to collect their cash. Just a decade ago, hawala agents would give their clients an open receipt, often in the form of a bank note, which had to be presented at the other end to get the cash. The serial number on the bill served as the confirmation number. “Back then,” Riaz said, “the entire process took about a week. Now they just send the number by text message on their cell phones, and the whole transfer happens in seconds.”