An underworld paved with gold
By Bertil Lintner
It seemed like a routine announcement. Last August 30, the London Bullion
Market Association issued a statement revoking the status of an associate
member, ARY of Dubai, one of the wealthiest of the United Arab Emirates.
But in fact, it was the first overt outcome of a long investigation into
money-laundering, drug-trafficking and possible terrorism-financing. Since
the August announcement, ARY has had several of its British bank accounts
closed and the revenue authorities are investigating its finances. This
could be the end of the road for one of the hitherto best-respected - and
most well-connected - jewelers and gold dealers in the Persian Gulf region,
Abdul Razzak Yacoub Ghandi, whose initials form the name of the group of
companies he owns.
Apart from controlling a large share of Dubai's lucrative gold wholesale
business, he runs a satellite TV company, ARY Digital, which he claims
transmits into 107 countries, manages a gold refinery called ARY Aurum Plus,
and has interests in local real-estate development. He also used to manage
the ill-gotten gains of Abdul Qadeer Khan, the "father" of Pakistan's
nuclear-weapons program.
When Khan fell from grace in February 2004, he and his relatives tried to
recover the funds they had deposited with ARY. But it was all in vain. The
millions of dollars that Khan had made from selling nuclear-bomb designs to
countries such as North Korea and Libya had already been transferred to
secret bank accounts, to which only ARY has access, investigators assert.
So far, however, the only conviction in the region against him or any of his
associates occurred when, in July 2002, a court in Rawalpindi, Pakistan,
sentenced former prime minister Benazir Bhutto to three years' hard labor
for failing to answer corruption charges.
She was tried in absentia for having received kickbacks for awarding a
monopolistic contract to ARY Gold to import gold to Pakistan. In 1998,
Pakistani investigators found two checks, each for US$5 million, allegedly
paid by ARY Gold in 1994 to Asid Ali Zardari, Bhutto's husband, to secure a
two-year monopoly on gold imports to Pakistan.
At the time, Ghandi acknowledged that he held the monopoly and that he had
shipped $500 million worth of gold from 1996-98, but stated that he had not
paid any bribes and that his "enemies" had falsified the bank documents.
Bhutto never went to jail as she spends most of her time in self-imposed
exile in the UAE, and Ghandi himself never had to testify in a Pakistani
court. He is well connected in the UAE as well as in Pakistan, where he
counts President General Pervez Musharraf among his friends.
According to one intelligence source, Ghandi also has some rather rare
contacts in the tribal region on the Afghan-Pakistani border, which have
proved useful to the Pakistani authorities. In August 2004, he reportedly
went to Pakistan on a secret mission at the request of Pakistan's
Inter-Services Intelligence (ISI).
The purpose was to broker a ceasefire between the Pakistani army and the
leaders of the Wana tribes of Waziristan, who had refused to recognize the
authority of the government in Islamabad and were running their own affairs
and cross-border businesses. Ghandi's connections with these tribal leaders
go back to the days of the Taliban regime, when they provided him with
logistical support in transferring gold and other commodities from
Afghanistan to Dubai. The UAE was one of very few countries that had
diplomatic relations with the Taliban regime.
On February 17, 2002, the Washington Post reported that even more cash and
gold had been flown out of Afghanistan just before the fall of the Taliban
at the end of 2001 and sent to Dubai. The paper quoted US customs officials
as saying they were "scrutinizing movements of gold by several companies,
including ARY". Ghandi strongly denied this and threatened to sue the Post
but, in the end, settled for a letter to the editor. A court case could have
brought to light more revealing details about his gold business that he
would prefer to keep to himself.
Dubai's gold market is one of the liveliest - and least regulated - in the
world. The air-conditioned Gold & Diamond Park off Sheikh Sayed Road stands
out as one of the most impressive of all the new buildings in the emirate,
but the old gold market, or Gold Souq as it is called, in the old town of
Deira remains the center for the region's gold trade. Dubai became an
entrepot for the re-export of gold after the independence of India and
Pakistan in 1947. The governments of those two new countries barred gold
imports as a currency-stabilizing measure. British merchants then started
bringing gold from South Africa to Dubai, from where local traders smuggled
it into India and Pakistan.
The trade in gold took off in the early 1960s, when the ruler of the emirate
dredged the Dubai Creek and made it possible for thousands of wooden trading
boats, or dhows, to anchor there. In 1967 the price of gold in Dubai was $35
an ounce, while in India the same quantity of the precious metal sold for
$68. The gold trade peaked in 1997 when 600 tons was re-exported from Dubai.
Gold was brought in not only from South Africa but also from Italy and
Russia. In recent years, India has liberalized its restrictions on the
importation of gold, so the trade is no longer what it used to be.
But it is still substantial, and its significance amounts to more than the
mere trade in a valuable commodity. According to the Paris-based Financial
Action Task Force: "Precious metals, and in particular gold, offer the
advantage of having a high intrinsic value in a relatively compact form.
Gold can be bought and sold for currency with little difficulty in most
areas of the world. Furthermore, it holds its value regardless of the form
it takes - whether, for example, in bullion or as a finished piece of
jewelry ... The advantages that gold provides are also attractive for the
money launderer, that is, the high intrinsic value, convertibility, and
potential for anonymity in transfers."
ARY capitalized on those advantages when, between October 2002 and December
2003, it exported gold bars worth 6.4 million euros ($7.8 million at the
current exchange rate) to Britain. ARY Traders in Dubai first shipped the
gold to its UK subsidiary, ARY Jewelers, which sold it to a local company
called Diamond Jewelers. Various UK-based Pakistani dealers, masquerading as
jewelers, then bought the gold and were thus able to exchange their stacks
of cash for a commodity that could be deposited in a bank. According to
Western investigators, Pakistani "jewelers" were, in fact, drug traffickers
who needed to launder their money.
It was not always smooth sailing, however. In October 2002, Mohinder Singh
Basra, a Wolverhampton resident of subcontinental origin, admitted
laundering 25 million British pounds of "dirty money" from business premises
in the city. At the time, Detective Inspector Chris Solway said that "what
we have uncovered was a major network involved in transferring huge sums of
money via America to Dubai where it then effectively disappeared". Basra was
sentenced to eight years' imprisonment for money-laundering while, according
to the British Broadcasting Corp, the "Dubai-based partner is still wanted
for questioning". That partner was, hardly surprisingly, the ARY group of
companies.
The year before, the accounts of ARY Digital UK were the subject of three
notices of suspected money-laundering. The satellite broadcasting company
had recorded an unsupported increase in turnover from 570,000 euros in 1999
to more than 4.7 million euros in 2001. Police investigators suspected that
ARY Digital UK was acting as a hawala - underground banking service - in
Britain.
Hawala is closely connected with the Dubai gold trade. It means "transfer"
in Arabic, while Interpol describes it as "money transfers without money
movement". The system has been used for hundreds of years to move money
around legal and financial barriers in the Middle East and South Asia. It is
also faster, cheaper - usually there is no commission - and more reliable
than ordinary bank transfers, which are burdened by bureaucracy and legal
restrictions. For instance, if a gang smuggles a quantity of gold to India
and sells it there, the seller in Dubai wants to get paid, but not in
inconvertible Indian rupees. At the same time, Indian workers in the emirate
want to send money home so they pay the hawaladhar in Dubai in UAE dirhams,
which are freely convertible.
The hawaladhar keeps that cash, and instructs his partner in India to pay
the workers' relatives with Indian rupees in recompense for the smuggled
gold. In this way, everyone gets paid but it is only the gold that moves.
Gold dealers across the world provide a facility whereby all can be
laundered and transferred - and not only for guest workers in the Gulf
region. Criminal networks and terrorist gangs are the main patrons of the
hawala system. And the biggest gold dealer in Dubai is ARY, with an
estimated 45% share of the local gold wholesale business, which in 2003 was
believed to be in the order of $5.87 billion.
More worrying than its role as an informal transfer service for expat
workers is the role hawala is believed to have played in
terrorism-financing. As there is no paper trail, the secrecy is perfect -
and because most terrorism networks today have deep roots in the Middle
East, it is perhaps not surprising that Dubai functions as their financial
base. Since the September 2001 attacks in the United States, Dubai has come
under pressure from Western governments to regulate its hawala operators as
well as the emirate's established banking sector.
According to Singapore-based terrorism expert Rohan Gunaratna, most of the
cash spent by the September 11 militants was transferred from Dubai. The US
investigations into the attacks exposed trails leading back to Dubai. Much
of the $250,000 used to fund the attacks was channeled through bank accounts
in the emirate to suicide pilot Mohamed Atta and other suspected hijackers -
and further cash was, most probably, moved through the hawala system.
The role that Ghandi and his companies have played in facilitating the
transfer of money for various militant groups is debatable, but his links
with the erstwhile Taliban regime in Afghanistan, his close, personal
connections with tribal leaders in the Afghan-Pakistani border area, and his
dealings with the ISI and A Q Khan's network are enough for Western
investigators to strongly suspect that there is a connection.
Ghandi did not respond to questions sent to him by fax regarding his alleged
involvement in moving the Taliban's gold out of Afghanistan, why the London
Bullion Market Association had revoked his associate membership, or if he
indeed had bribed Zardari to secure a monopoly on gold imports to Pakistan.
Ghandi was actually born in 1944 in Sindh in the then-undivided British
India. Sindh became a province of Pakistan after independence, and Ghandi
grew up in Karachi. He moved to Dubai in 1969, where he soon established
himself as a major player in the gold business. Apart from being a gold
trader, he is also the chairman of the World Memon Organization, a charity
that was set up in Dubai in March 2002, at the same time that,
coincidentally or otherwise, the US and Pakistani authorities were starting
to go after other Islamic charities suspected of being fronts for terrorism
financing.
The Memons are descendants of low-caste Hindus who converted to Islam during
the Mughal period in India. Their original base was in Gujarat, but being
enterprising traders and seafarers they can now be found in Pakistan, India,
the UAE, Kenya, Uganda, South Africa, Britain, Canada and the US. They are a
tightly knit community and many orthodox believers do not consider them
"real" Muslims, which sets them apart from most of the region's radical
Islamic networks.
The vast majority of Memons are straightforward businessmen, but among them
- and closely connected with Ghandi in Dubai - is Iqbal Memon, also known as
Iqbal Mirchi, a wanted international drug trafficker and the right-hand man
of Dawood Ibrahim, the leader of a notorious Mumbai-based criminal syndicate
that was behind a string of bombings in that city in March 1993. The attacks
are widely believed to be the retaliation by the Mumbai underworld - and
some Islamic militants - for the demolition of the Babri Mosque by Hindu
nationalists in December 1992. Dawood has been on Interpol's notice after
the 1993 blasts and, in 2003 the US Treasury Department put his name on its
global terrorist list linking him to al-Qaeda. He is also a Memon and
closely connected with Pakistan's ISI, and he is believed to split his time
between Pakistan and Dubai.
As chairman of the World Memon Organization, Ghandi presides over millions
of dollars' worth of contributions to the organization's "charitable" work
in India and Pakistan. To investigate the organization's finances and link
them to terrorism financing is impossible, but as one Western intelligence
official put it: "ARY nevertheless has ideal conditions for this. On the one
hand, he controls the finances of an Islamic charitable organization and, on
the other, there are indications of concealed hawala banking."
Whatever the case, Ghandi's star is on the wane in Britain after his
exclusion from the London Bullion Market and, as one investigator concluded:
"It's now up to the Dubai authorities to take further action." That may not
be easy, given his clout - and money - in the emirate and beyond.
Bertil Lintner is a former correspondent with the Far Eastern Economic
Review. He is currently a writer with Asia-Pacific Media Services.
