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The Rise of Money Laundering Across The Afghanistan-Pakistan Border

An Afghan man pushes a cart with a woman and children as they cross the border between Afghanistan and Pakistan in the Torkham area of Nangarhar Province on September 15.
An Afghan man pushes a cart with a woman and children as they cross the border between Afghanistan and Pakistan in the Torkham area of Nangarhar Province on September 15.

With thousands of Afghans and Pakistanis passing through checkpoints on the Durand Line every day, it is becoming increasingly difficult for customs officers and border guards to regulate the flow of illegal currency, say authorities, damaging the economy on both sides of the mountainous border.

The incumbent Pakistan government’s ban on Telegraph Transfers (TT) means more foreign currency is now smuggled by hand through checkpoints than ever before.

Between July and October 2015, customs officials at the Torkham crossing alone seized more than $2 million in foreign currency, although this is merely a drop in the ocean, say analysts.

Smuggling Corridor

“It is impossible for custom officials to check each and every vehicle transporting goods to Afghanistan from parts of Pakistan because each day around 1,000 to 1,300 trailers loaded with goods cross the border,” a customs official at Torkham told Afghanistan Today on condition of anonymity.

The official stressed that customs are only responsible for checking vehicles, speculating that large sums of foreign currency are smuggled by people crossing on foot who bribe agents in other departments.

“The government has compelled traders and money exchangers to opt for illegal ways to continue their business by imposing a number of taxes on them including sales, income, and general tax,” says Fawad Ishaq, former president of the Khyber Pakhtunkhwa Chamber of Commerce and Industry (KPCCI). Ishaq added that high taxes on domestic transactions merely encourage illicit cross-border trade.

Security sources retort that border checks have become more stringent. “We are taking concrete steps in border areas - after militant attacks on the Army Public School and College in Peshawar - to have closer checks on movement of people making entries and exits” claimed a senior security official working at a Durand Line checkpoint.

A collection officer working at Torkham who preferred not to be named says foreign currency smugglers are regularly apprehended at the border.

“A smuggler was apprehended with $40,000 and gold at Torkham border recently,” the official says. Such arrests are not uncommon, say experts, although prosecutions are.

Lack of Prosecutions

Under Pakistani law, foreign currency smugglers can face sentences of up to 10 years under the Anti Money Laundering Act 2010, yet few ever face trial.

“The law has not been implemented in true spirit, and not only civilians but officials of various departments are violating it freely,” says Bashir Ahmad Safi, a lawyer with the High Court in Peshawar. Safi says smugglers are often released soon after being arrested.

Smugglers confirm that the measures in place do little to detract from their profits.

“Ofiicials of the Frontier Corps and local Khasadar (local tribal forces) forces are well aware of these things but they receive bribes from agents and so benefit from the illicit trade,” one smuggler told Afghanistan Today.

The black market kingpin says he has smuggled more than $3 million in six months to Afghanistan via the Torkham border crossing. Being caught is cheap, he added.

A $10 Get-Out-of-Jail-Free Card

“I was caught red-handed once by security officials deployed on the Torkham border, but I just bribed them with $10 and they allowed me to enter the neighboring country,” the smuggler told Afghanistan Today. “I stick the dollars to my body and just cross.”

There are more than 350 money exchangers in Peshawar alone, according to Shakil Ahmad Khan, the general secretary of Sarafa Association (Money Changers Association), of which at least 200 are Afghans with transboundary businesses.

While no official statistics exist on the losses to both countries, economists estimate that millions of dollars in illegal currency are transported back and forth between Afghanistan and Pakistan every month.