Where money is in the air

The U.S. Treasury Department has just imposed sanctions on one of Afghanistan’s largest “money exchange” houses, New Ansari. This is an anti-corruption measure that U.S. officials hope will stop the flood of drug money and other ill-gotten gains from finding their way to various unsavory characters across the globe.

I wish them success, but trying to impose order on Afghanistan’s financial sector is perilously close to chasing smoke.

A lifetime ago – well, maybe six years – I had never heard the term “hawala.” It means “by air” in Dari, and it is the major way Afghanistan, and other countries in the region, have of transferring funds easily and, if they wish, almost undetectably across borders.

At the time I had just come to Afghanistan and was still hopelessly naïve about how business was accomplished in this country. I was teaching journalism in a British-based charity, which was undergoing some financial difficulties. This meant that we had had no cash for over a month, and the landlord, not to mention Internet providers, fuel merchants, and the staff, were getting edgy. Afghanistan is not the place to alienate your guards.

So I placed a desperate call to the head office in London, where I was told it would take at least ten days to transfer funds. This was not going to work, and I told them so. I also conferred with our Afghan accountant, who just laughed.

“Don’t worry about it,” he said, picking up the phone. “We’ll have the money this afternoon.”

Our accountant told the London office to take $20,000 to someone named Mustafa, who was based out near Heathrow airport. Mustafa would make a call to Kabul, and – presto! – $20,000, minus about six percent, would be given into our hot little hands. It took roughly an hour, the time needed for an employee of the charity to hop on his motorcycle to reach Mustafa. He handed over the cash, Mustafa gave him another phone number and an identifying six-digit string, he called our accountant, who was waiting by Mustafa’s counterpart in Kabul, and we were flush again.

I thought this was very efficient; I had no idea that I had just witnessed first-hand the way that tens of millions of dollars a day – some innocent, most not – fly around the world. This is “money exchange” in the real sense of the word: money in Kabul is exchanged for money in London, Paris, Brisbane, or New York. And this is exactly what New Nasari does.

A $20,000 emergency transfer is not a big deal, and we were certainly not terrorists or drug lords. The transaction was even legally recorded. But the same cannot be said of many of the customers for Afghanistan’s hawala system.

A few years ago, when the United States and other donor countries began putting pressure on the Karzai administration to clean up their finances, the Afghan government started requiring that these “hawala” merchants register, record their transactions, and pay taxes on their earnings.

A friend of mine has an uncle who engages in hawala. He thought this was very funny.

“So, my uncle is now registered,” said my friend. “He records maybe one in every five or ten transactions. Not the big ones, not the ones from drug dealers. But enough to keep the government off his back.”

The center of hawala transactions is in a scruffy market called Sarai Shahzada. In addition to a rather nondescript building where the major traders like New Nasari are located, there is a back courtyard where hundreds of smaller dealers sit, some out in the open, others in tiny cubicles. The piles of money everywhere are staggering – as is the air of vague menace.

I only went once, another time when we were short of money. It is a pretty scary place. I was accompanied by three men from the office, who remained close by my side. I have no idea whether any of them were armed.

The driver refused to park his car anywhere near, and drove around until we called him. We threaded our way through the crowds, many of whom gawked at the rare sight of a foreign female in their midst. We went into a small “office”, handed over our magic number, and I was given a few thousand dollars. We rushed back to the driver and from there to the relative safety of our office.

I have no doubt the U.S. Treasury Department can inconvenience New Ansari, and maybe keep it from transferring funds for a while. But what about the hundreds of others, with disposable mobile phones, no bank accounts, and no records? How can we keep them from conducting their business? And how do we freeze their “assets” – their poppy palaces, Jeep Cherokees with tinted windows, the gold jewelry for their wives and the lavish weddings for their sons that they finance with their earnings?

The New Yorker magazine recently quoted an American official characterizing Afghanistan as “a vertically integrated criminal enterprise.” After my trip to Sarai Shahzada, I think he may have been too generous. Vertical integration implies some sort of order, some measure of control. This is exactly what Afghanistan is lacking.