KARACHI: The news about the arrest of Altaf Khanani, a well-known money-changer, by US authorities has sent shockwaves among exchange companies operating in Pakistan. They fear more arrests as more and more transactions come under scrutiny across the world.

The US authorities revealed on Friday that they had arrested Altaf Khanani in September and accused his firm, Khanani Money Laundering Organisation (MLO), of laundering illicit funds for organised crime groups, drug trafficking organisations and designated terrorist groups throughout the world.

While most of the money-changers avoided discussing the issue of Altaf’s arrest, they accepted that the incident may raise pressure on them. They also expect more names to appear in the case since the man has deep connections in Pakistan.

Altaf, a Karachiite by birth, was a partner of Kalia group, one of the biggest money-changers working under the name of Khanani and Kalia. The exchange company was banned about five years ago and their offices were sealed by the FIA.

Four of their employees were jailed, but the case could not be proved against them in court. They were released, but the State Bank did not restore their licence because they were also wanted in money laundering cases in a number of countries.

The US Office of Foreign Assets Control (OFAC) on Friday designated Dubai-based money services business Al Zarooni Exchange for being owned directly or indirectly by the Khanani MLO, and for materially assisting, sponsoring, or providing financial support to the Khanani MLO.

Their properties in which the Khanani MLO or Al Zarooni Exchange has an interest, were blocked and U.S. persons were prohibited from engaging in transactions with them.

A money changer, who wished not to be identified, said Haji Haroon, another money changer, has been picked up by security agencies in connection with money laundering.

“For the last four months he has been in custody of the agency and has reportedly revealed 82 names of money changers, businessmen and politicians involved in transfer of illegal money from Pakistan,” said the money changer.

The Forex Association of Pakistan (FAP) did not betray any alarm over the arrest, maintaining that money changers in Pakistan had no links with any illicit business.

“I believe that exchange companies operating in Pakistan are not involved in this kind terrorist funding or money laundering. I don’t feel I have to worry,” said Malik Bostan, president FAP.

He said it is impossible to completely eradicate the Hundi system. It has been working world over and illegal money is transferred through these illegal channels.

Flow of illegal money is believed to be high from Pakistan particularly to Dubai, two months back Pakistan was placed among top three investors in Dubai property.

Money changers were reluctant to name names but said Khanani’s old partners and their business links in Pakistan could see trouble.

The Secretary General of Exchange Companies Association of Pakistan Zafar Paracha said there are some popular ways to send out illegal money from Pakistan: through Hundi; carrying cash on person, in form of gold and diamonds.

The transfer of wealth through diamonds has gained popularity as few months back its demand escalated without an obvious reason. Millions of dollars can be transferred through very small pack of diamond.

Published in Dawn, November 15th, 2015