Money laundering is a crime which perhaps more than any other sucks money out of developing countries and into the murky world of offshore accounts in Caribbean Islands like the Caymans and Crown Dependencies like Jersey and Guernsey.
Money moves from poorer countries in Africa and Asia, often siphoned off from the trade in natural resources, sales of illegal goods and the proceeds of corruption to offshore centres, either sitting in accounts waiting for a rainy day, or transferred into western economies in the form of property, cars and accounts at luxury goods stores. Perhaps nowhere in the world is money laundering as blatant as in Afghanistan, where money flows like water from Kabul airport to the Middle Eastern Emirate of Dubai. Millions of US dollars are routinely taken on flights by leading Government officials to be recycled in the lax (from an anti-money laundering perspective) regulatory environment of Dubai.
While most of the funds taken are never even investigated or accounted for, one man who was found out but fled was Sher Khan Farnood, former chairman of the Bank of Kabul. Farnood, an expert poker player, was found to be making bad loans and embezzling funds to purchase villas in the Palm Jumeirah resort in Dubai. When news of this became public it nearly led to the collapse of the country’s fragile banking system, as concerned depositors rushed to take out their cash. Meanwhile, others easily move money across borders, like the Vice-President Ahmad Zia Massoud who was stopped and questioned at Kabul airport with suitcases packed with $25 million in cash, on-route to Dubai, but crucially he was allowed to continue his journey.
As Afghanistan lacks many easily extractable natural resources, many of these funds derive from aid projects being systematically skimmed, or firms working in Afghanistan completing contracts being shaken down. Of course the other major revenue stream is from the sale of heroin, with only 3.5 per cent of Afghan exports of the opiate being stopped; it represents a low risk form of income for farmers and smugglers. Heroin exports represent around 15 per cent of the country’s GDP and a major source of hard currency.
The problems of Afghanistan, such as war, corruption, and an unfavourable investment climate are the reasons people move their money to Dubai, as there is no point in risking money in such an unstable environment. Dubai remains the offshore banking centre of choice for its physical proximity and use of Hawala (paperless trust based banking) mean it is ideal for warlords, leaders and people with money to move their assets there. Also, the quality of life, opportunities for property investment and most of all a relatively relaxed regulatory regime make the ideal place to recycle US dollars which originated in international aid and military budgets.