Khanani and Kalia Khanani and Kalia International (Private) International (Private)

Limited (KKI)Limited (KKI)

IntroductionIntroduction::

The company was founded in The company was founded in 1983, by Hanif Kalia, a well 1983, by Hanif Kalia, a well known businessman, known businessman, educationalist and social welfare.educationalist and social welfare.

KKI was part of the Kalia KKI was part of the Kalia Group of companies founded by Group of companies founded by Hanif Kalia and run by Hanif's Hanif Kalia and run by Hanif's younger brother Abdul Munaf younger brother Abdul Munaf Kalia.Kalia.

Mr. Javed Khanani is the other Mr. Javed Khanani is the other partner of KKI.partner of KKI.

Its corporate office was in Its corporate office was in Karachi and international Karachi and international marketing and commercial marketing and commercial services head office in Canada.services head office in Canada.

It had a franchise of branches It had a franchise of branches all over Pakistan plus a number all over Pakistan plus a number of branches overseas.of branches overseas.

•The company had branches in The company had branches in Karachi, Lahore and Islamabad, Karachi, Lahore and Islamabad, and a franchises networked all and a franchises networked all over Pakistan. The company also over Pakistan. The company also had foreign branches in had foreign branches in LondonLondon, , GlasgowGlasgow, , SydneySydney, , New YorkNew York, , TorontoToronto, , MontrealMontreal, , Kuwait Kuwait CityCity, , BahrainBahrain, , and Qatar.and Qatar.

KKI offered a number of service KKI offered a number of service including the following.including the following.

Currency Exchange Currency Exchange

Home RemittancesHome Remittances

Outward Remittances andOutward Remittances andBusiness AdministrationBusiness Administration

KKI was part of the Kalia Group KKI was part of the Kalia Group which also provided services which also provided services including management consultancy, including management consultancy, internal auditing, IT management, internal auditing, IT management, HR management, business HR management, business administration, marketing, and administration, marketing, and R&D on behalf of clients. R&D on behalf of clients.

In addition the group had In addition the group had a number of related companies a number of related companies which included;which included;

Kalia Security Vault CorporationKalia Security Vault Corporation In 1999 Kalia Group In 1999 Kalia Group launched security vaults (Lockers) launched security vaults (Lockers) services with the establishment of services with the establishment of Kalia Security Vault (Pvt) Ltd.Kalia Security Vault (Pvt) Ltd.

KalsoftKalsoft KalSoft (Pvt.) Ltd was KalSoft (Pvt.) Ltd was

incorporated in 1999 while it started incorporated in 1999 while it started its commercial operations in the year its commercial operations in the year 2000. The basic aim of this project was 2000. The basic aim of this project was to explore the international software to explore the international software market and thus the emphasis was laid market and thus the emphasis was laid on Software on Software

Export. Export.

Kal PointKal Point Kalia Group was established Kalia Group was established

as s socio-commercial organization as s socio-commercial organization KalPoint.com. It is a e-commerce KalPoint.com. It is a e-commerce portal with over 35 categories and portal with over 35 categories and over 60,000 web pages. It has over 60,000 web pages. It has claimed to be the largest interactive claimed to be the largest interactive portal in Pakistan and was declared portal in Pakistan and was declared as Pakistan’s best website by the as Pakistan’s best website by the leading IT magazines in 2009.leading IT magazines in 2009.

Khanani and Kalia Khanani and Kalia International (Private) Limited International (Private) Limited (KKI) was one of the biggest (KKI) was one of the biggest foreign exchangeforeign exchange companies companies in Pakistan until November in Pakistan until November 20082008KKI, as per its web site, claims KKI, as per its web site, claims

to be Pakistan’s first ISO to be Pakistan’s first ISO 9001 and 27001 certified 9001 and 27001 certified Exchange Company. Exchange Company.

It is quite alarming if, in spite of all It is quite alarming if, in spite of all certifications and operating certifications and operating procedures in place, KKI was unable to procedures in place, KKI was unable to trace and stop the illegal transaction trace and stop the illegal transaction by its franchise.by its franchise.

Also, what the State Bank of Also, what the State Bank of Pakistan was doing of few weeks.Pakistan was doing of few weeks. when the Dollar was elevated in when the Dollar was elevated in open market from 70 rupees to open market from 70 rupees to 90 rupees within a span90 rupees within a span

Background:Background:Since the depreciation of the Since the depreciation of the rupeerupee

from July 2007, the from July 2007, the Federal Federal Investigation AgencyInvestigation Agency was was investigating the unexpected investigating the unexpected depreciation by the orders of the depreciation by the orders of the Pakistani governmentPakistani government

In November 2008, the government sought In November 2008, the government sought support from support from InterpolInterpol with whose help the with whose help the FIA cracked down all over Pakistan FIA cracked down all over Pakistan searching for persons involved in illegal searching for persons involved in illegal smuggling of US dollars outside Pakistan.smuggling of US dollars outside Pakistan.

The FIA conducted raids in various The FIA conducted raids in various parts of parts of KarachiKarachi detained more detained more than 12 people including Munaf than 12 people including Munaf Kalia, and ten officials of the Kalia, and ten officials of the National Database Registration National Database Registration AuthorityAuthority suspected of providing suspected of providing counterfeit identity cards.counterfeit identity cards.The directors of the KKI were accused The directors of the KKI were accused

of violating the Foreign Exchange of violating the Foreign Exchange Regulations Act, the Prevention of Regulations Act, the Prevention of Electronic Crimes Ordinance and the Electronic Crimes Ordinance and the Pakistan Penal Code by operating a Pakistan Penal Code by operating a money transfer system based on money transfer system based on personal contacts, known as hawala.personal contacts, known as hawala.

Munaf Kalia and Javed Khanani, Munaf Kalia and Javed Khanani, directors of Khanani and Kalia directors of Khanani and Kalia International (KKI), the largest International (KKI), the largest Foreign Exchange company of Foreign Exchange company of Pakistan, were arrested by FIA Pakistan, were arrested by FIA on the charges of money on the charges of money laundering.laundering.The main charge against them is The main charge against them is

that they were involved in physical that they were involved in physical transfer of foreign currency from transfer of foreign currency from Pakistan and ran the illegal Pakistan and ran the illegal Hawala or Hundi business.Hawala or Hundi business.

Investigation by FIA:Investigation by FIA:

Special Investigation Group (SIG) Special Investigation Group (SIG) of FIA Lahore prepare a report of FIA Lahore prepare a report in April 2008 about the flight of in April 2008 about the flight of dollars from the country, fearing dollars from the country, fearing that a forex crisis would hit the that a forex crisis would hit the country in the near future. The country in the near future. The report also recommended report also recommended strong and instant action strong and instant action against persons involved in the against persons involved in the Hundi and Hawala business.Hundi and Hawala business.

According to FIA officials, Lahore, According to FIA officials, Lahore, Gujranwala, Karachi and Peshawar are the Gujranwala, Karachi and Peshawar are the main cities where a majority of money main cities where a majority of money changers were running the Hundi and changers were running the Hundi and Hawala business and anyone could send Hawala business and anyone could send any amount anywhere in the world without any amount anywhere in the world without any check.any check.

FIA officials said during initial FIA officials said during initial interrogation Javed Khanani has interrogation Javed Khanani has disclosed the names of some very disclosed the names of some very influential people whose money he influential people whose money he had sent abroad.had sent abroad.

November 10, 2008November 10, 2008

On November 10, 2008, On November 10, 2008, the State Bank of Pakistan suspended the State Bank of Pakistan suspended the licence of Khanani and Kalia for 30 the licence of Khanani and Kalia for 30 days and debarred KKI’s head office, days and debarred KKI’s head office, branches, franchises payment booths branches, franchises payment booths and currency exchange booths from and currency exchange booths from undertaking any kindundertaking any kind of business of business

for violating its rules and for violating its rules and regulationsregulations

December 10, 2008December 10, 2008

On December 10, 2008, the State On December 10, 2008, the State Bank of Pakistan suspended Bank of Pakistan suspended the licence of Khanani and Kalia the licence of Khanani and Kalia for an indefinite period of time. for an indefinite period of time. The suspension order further The suspension order further stated that the company's stated that the company's headquarter, branch offices headquarter, branch offices and/or franchise cannot carry and/or franchise cannot carry any business dealings.any business dealings.

The Federal Investigation Agency The Federal Investigation Agency arrested Hanif Kalia, chairman of the arrested Hanif Kalia, chairman of the Kalia Group, which runs nearly a dozen Kalia Group, which runs nearly a dozen businesses across the country, for his businesses across the country, for his group`s alleged involvement in money-group`s alleged involvement in money-laundering.laundering. THE FIA HAS ARRESTED MORE THAN THE FIA HAS ARRESTED MORE THAN

A DOZEN OFFICIALS OF THE A DOZEN OFFICIALS OF THE COMPANY SINCE NOVEMBER 7. THE COMPANY SINCE NOVEMBER 7. THE AGENCY HAS BEEN INTERROGATING AGENCY HAS BEEN INTERROGATING THEM IN TWO CASES REGISTERED THEM IN TWO CASES REGISTERED IN KARACHI AND LAHORE.IN KARACHI AND LAHORE.

Money Transferring MethodMoney Transferring Method

Money transfers taking place Money transfers taking place anonymously through a series anonymously through a series of connected brokers who of connected brokers who accept money at one end and accept money at one end and then ask one of their agents to then ask one of their agents to deliver money at another deliver money at another location. The brokers keep location. The brokers keep track only of what they owe track only of what they owe each othereach other. .

KKI has transferred the dollars of KKI has transferred the dollars of worth Rs 38 bollions through Hawala worth Rs 38 bollions through Hawala and Hundiand HundiThe case of Khanani and Kalia is still The case of Khanani and Kalia is still

in progress. We have to see if real in progress. We have to see if real culprits behind “flight of dollar” are culprits behind “flight of dollar” are taken to justice or this turns out to taken to justice or this turns out to be another facade. The government be another facade. The government and media have to be very cautious and media have to be very cautious in handling of this case as any false in handling of this case as any false move will further derogate the move will further derogate the image of Pakistan abroad and image of Pakistan abroad and amplify the ongoing financial crisis.amplify the ongoing financial crisis.

Thank you allThank you all

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