The Wall Street Journal, August 12, 2010

Afghanistan Money Probe Hits Close to the President

Afghan customs documents reviewed by the Journal indicate that .18 billion of cash was flown out of the country between the start of 2007 and February 2010.

By Matthew Rosenberg

KABUL - When U.S.-trained agents from an anticorruption task force raided the headquarters of the nation's largest "hawala" money-transfer business, they caught many people by surprise: the company's politically connected executives, the nation's top law-enforcement officer, even Afghan President Hamid Karzai.

Tens of thousands of pages of documents were carted out of the New Ansari Exchange on Jan. 14. Armed with those records, investigators have been digging into the movement of billions of dollars in and out of Afghanistan.

U.S. and Afghan officials say they have found evidence that New Ansari was helping to launder profits from the illicit opium trade and moving money earned by the Taliban through extortion and drug trafficking. The officials also say they have found links between the money transfers and some of the most powerful political and business figures in the country, including relatives of Mr. Karzai.

The New Ansari probe is now threatening to disrupt relations between the Afghan president and his U.S. allies. Last week, Mr. Karzai took more direct control of the task force that staged the raid, the Sensitive Investigative Unit, and another U.S.-advised anticorruption group, the Major Crimes Task Force. He ordered a handpicked commission to review scores of past and current anticorruption inquests.

Senior U.S. military and civilian officials with direct knowledge of the events regard Mr. Karzai's move as an effort to protect those close to him and, in the process, to quash the investigation into New Ansari. The officials describe it as a blow to American-backed anticorruption efforts. Members of the Sensitive Investigative Unit are vetted and trained by the U.S. Drug Enforcement Administration, and the Major Crimes Task Force is trained by the Federal Bureau of Investigation.

One of the U.S. officials called the situation "a real reality check" for the U.S. and its European allies. Mr. Karzai promised for years to clean up high-level corruption, and U.S. officials have in recent months been publicly supportive of the Afghan leader. Their thinking is that a soft touch, rather than the more critical tone adopted previously, might convince Mr. Karzai that a crackdown is in his interest, U.S. officials say.

Senior Afghan officials pledged to investigate the money transfers after The Wall Street Journal reported in June that huge sums of cash were being flown out of the country. "We need to investigate whose money it is and whether it is legal," Finance Minister Omar Zakhilwal said in July.

Afghan officials have known since the January raid, if not earlier, that New Ansari has played a central role in moving cash, U.S. officials say. Before the raid, so much money was passing through New Ansari in so many different currencies that it effectively set Afghanistan's exchange rates, says an official at Afghanistan's central bank and the senior U.S. official.

Afghan customs documents reviewed by the Journal indicate that $3.18 billion of cash was flown out of the country between the start of 2007 and February 2010. Couriers identified by U.S. and Afghan officials as working for New Ansari carried $2.78 billion of it, according to the documents.

One New Ansari courier, identified by the documents only as Rahmatullah, personally carried at least $2.3 billion out of the Kabul airport between the start of 2008 and the middle of 2009, much of it to the United Arab Emirates financial center of Dubai, a senior U.S. official said.

New Ansari's manager, Haji Muhammad Khan, said in a recent interview the company did nothing wrong. The money being flown out of the country was declared, so moving it was legal. [anasari]

Preliminary evidence collected by Afghan and U.S. investigators indicates that while some of the money came from legitimate businesses, some was diverted Western aid and logistics money, opium profits and Taliban funds, according to the U.S. and Afghan officials. Investigators are trying to uncover the exact sources of the money and determine who is benefiting.

U.S. officials say the customs records are incomplete, and that the sum carried out over that period likely is much larger than $3.18 billion. Following the Journal article in June, a U.S. Congress panel froze some $4 billion in nonurgent aid to Afghanistan.

Corruption in the Afghan government and business establishment has become a major source of tension between Mr. Karzai and the U.S. government, threatening to derail the U.S.-led coalition's counterinsurgency strategy. U.S. officials say it is crucial to restore the trust of ordinary Afghans in their own government, which has been shaken by pervasive commercial and government graft.

Because law enforcement is so lax, "anybody can choose his or her own law. New Ansari is not unique," says Amrullah Saleh, former chief of Afghanistan's intelligence service, who was dismissed in June over disagreements related to the president's efforts to start peace talks with the Taliban.

Hawalas like New Ansari move money globally using a network of dealers. A customer in Kabul, for example, might hand cash to a local hawala with instructions to send it to someone in Dubai. Five minutes later, the designated recipient can walk into a hawala in Dubai and pick up the money.

When New Ansari was founded in the southern city of Kandahar in the early 1990s, it was one of dozens of hawalas scrambling for a piece of the money-transfer business, a lucrative industry in an economy that at the time had no formal banks, and even today remains largely cash-based.

The company's fortunes rose at least in part through the relationship it developed with the Taliban, whose senior leaders governed most of Afghanistan from a headquarters in Kandahar, according to a former Afghan official and a former senior Taliban military commander. Some senior Taliban leaders were among the hawala's biggest customers, according to the Afghan official and the former Taliban commander.

Haji Muhammad Jan, one of New Ansari's founding partners and the current chairman of Afghan United Bank, acknowledges working with the Taliban when they were in power. "Everybody did business with the Taliban," he says. "They were the rulers."

By the late 1990s, New Ansari was one of the major hawalas in Afghanistan. After the U.S. invasion that ousted the Taliban in 2001, New Ansari developed relationships with those who assumed power, and it continued to grow, say current and former U.S. and Afghan officials. By 2007, New Ansari's owners opened Afghan United Bank, now the country's third-largest financial institution, by deposits.

Mr. Jan, the New Ansari founding partner who now is chairman of Afghan United Bank, is an investor in a suburban housing development that the president's brother, Mahmood Karzai, is building outside Kandahar.

Another key player in New Ansari, Haji Muhammad Rafi Azimi, Afghan United Bank's deputy chairman, is suspected of playing a role in a corruption case involving Afghanistan's former Islamic affairs and hajj minister, Sediq Chakari. Mr. Chakari was allowed to leave the country while under investigation for allegedly taking hundreds of thousands of dollars in bribes to steer to certain airlines the business of flying pilgrims to Mecca, Islam's holiest city. Mr. Chakari has denied wrongdoing.

Afghan and U.S. investigators allege that Afghan United Bank's Mr. Azimi, who hasn't been charged, was the middleman passing some of the alleged bribes from the airlines to the minister. Mr. Azimi couldn't be reached for comment.

The Jan. 14 raid on New Ansari was so sensitive that the anticorruption task force and the U.S. officials who work with it didn't tell any senior members of the Afghan government. Information leaks last year had scuttled raids on other hawalas.

The chief of the anticorruption unit didn't inform the nation's top law-enforcement official at the time, Interior Minister Hanif Atmar, until moments before the raid commenced, when he telephoned the interior minister from the front door of New Ansari's Kabul office, according to U.S. and Afghan officials.

Mr. Karzai was furious about the secret action, and after receiving phone calls from at least one senior New Ansari official, he hastily convened a meeting of senior cabinet ministers, according to a former Afghan official with direct knowledge of the events.

The interior minister, a close U.S. ally, had been briefed by then on the evidence that prompted the raid, but he never had a chance to present it. Instead, he was chastised for letting the raid take place, according to the former Afghan official and U.S. officials familiar with the events. The interior minister later was fired by Mr. Karzai over differences stemming from the peace overtures to the Taliban.

Mr. Karzai wanted to disband the Sensitive Investigative Unit, but he was talked out of it by his intelligence chief at the time, Mr. Saleh, said the former Afghan official and a U.S. official.

After the raid, New Ansari closed its Kabul headquarters. U.S. and Afghan investigators pored over the 42,000 seized documents as fast as possible. "We were afraid that if they couldn't get back into business, the financial sector could collapse," says a senior U.S. official whose staff helped oversee the document analysis.

Among other things, the documents revealed that between July 2009 and the day of the raid, New Ansari moved almost $1 billion out of Afghanistan, most of it to Dubai, U.S. officials say.

New Ansari's books were returned four days later, the senior U.S. official says. The company's Kabul offices soon reopened, only to close for good a few weeks later.

"Whatever I was doing was legal and in accordance with Afghan laws," says New Ansari's manager, Mr. Khan. The Americans, he says, "continued their pressure on me and forced me to leave my business once and for all."

In late July, the Sensitive Investigative Unit and the Major Crimes Task Force arrested Mohammed Zia Saleh, then head of Afghanistan's National Security Council. (He isn't related to the former spy chief.) Western officials say Mr. Saleh was a key link between the Karzai administration and New Ansari, and they say he was heard in a taped conversation soliciting a bribe—a $10,000 car for his son—in return for quashing the inquiries into New Ansari and the former Islamic affairs minister. Mr. Azimi, the deputy chairman of Afghan United Bank, or people speaking on his behalf are believed to have offered the car as part of a larger proposed payoff, the officials say.

Mr. Saleh couldn't be reached for comment. Officials in the Karzai administration have raised questions about the recording's authenticity.

Mr. Karzai has ordered the newly formed commission of inquiry to monitor all operations of the two anticorruption agencies, and to review all current and former investigations. The Afghan government says its goal is to ensure that the human rights of probe targets aren't violated, and that investigators respect Afghan laws.

It is unclear how the New Ansari investigation will be affected. New Ansari's manager, Mr. Khan, says the business remains closed, but there is evidence to the contrary. Although its headquarters in Kabul is shuttered, its office in Kandahar was up and running one recent day, with long lines of people waiting to send money.

U.S. and Afghan officials say New Ansari offices in other parts of Afghanistan and in the Pakistani city of Peshawar also are still open, as are the hawala's affiliates in the U.A.E. and other Middle Eastern and European countries.

Mr. Jan, the New Ansari founding partner and chairman of Afghan United Bank, says he cut ties to New Ansari in 2007. His claim is disputed by U.S. and Afghan investigators, current business associates and even political allies in Kandahar, where New Ansari got its start. They say he still owns a major portion of the business and oversees its operations, although day-to-day management falls to Mr. Khan.

Mr. Jan says neither the hawala nor Afghan United Bank has any current relationship with the Taliban.

U.S. investigators disagree, saying they have evidence the hawala has been moving money for the Taliban.

U.S. officials also say they have recorded phone conversations between Mr. Azimi, Afghan United Bank's deputy chairman, and members of the Taliban. In one conversation last year, U.S. officials say, a Taliban commander in Kandahar is heard apologizing for accidentally kidnapping Mr. Azimi's brother. The Taliban commander promised to release the man immediately, and pleaded with Mr. Azimi to forgive him, the officials say.

—Yaroslav Trofimov contributed to this article.

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