How Australian taxpayer dollars and a fake drug cartel helped bring down the world’s most wanted money launderer.
Following the money
IT WAS already a high-risk strategy: hand more than $1 million to a known criminal and hope to catch him laundering it.
What made the idea perilous, however, was the fact the money belonged to Australian taxpayers. And the criminal, holed up in Dubai, was notoriously elusive.
“My arse was in the sling,” said Richard Grant, a career cop from Melbourne.
The plan was “lawfully audacious”, but it was the only plan that might work.
For the first time, he has explained its intricate detail to Four Corners.
At the time of the operation, Grant was in charge of covert investigations at the Australian Crime Commission. From a non-descript building in Canberra, the agency operated in utter secrecy, and it wielded extraordinary powers. It could jail those who failed to answer its questions.
Grant already knew which questions he wanted answered: Who was laundering drug money for bikies? Where did they hide their cash? How did they get payment overseas for the next shipment?
“What we needed to do,” he said, “is to go up the tree.”
The cash collectors they picked up could tell him little. They were mere mules who didn’t know the true identity of those hiring them. Typically, they were alerted to money jobs by text message.
With time, however, the couriers led Grant to brokers, and the brokers led him to middle men.
What he and his team were discovering was alarming. These people seemed to be connected – not always to each other, but to a thriving network being run somewhere offshore.
Remitters in the mortgage belts of Sydney and Melbourne were running off-book transactions with business partners overseas, often in the Middle East. Criminal informants were talking about staggering sums of money leaving Australia.
Eventually, Grant had a name: Altaf Khanani.
“I think we had trouble even spelling Khanani’s name at the time that we started,” Grant said.
The global money laundry he ran appeared to wash illicit profits for everyone, whether they knew his name or not: Lebanese mafia syndicates in western Sydney, Hezbollah financiers, ice traffickers, and bikies who wore the words Lone Wolves or Comancheros emblazoned on their backs.
Grant didn’t know it when he began the work, but it turned out that the name Altaf Khanani had long featured in classified intelligence holdings from Spain to Turkey and from London to Washington.
The 56-year-old married father of four was clearly a threat to Australia. But Grant was actually looking at a few pieces of a much larger jigsaw.
Altaf Khanani was running the underworld’s equivalent of Goldman Sachs. His business measured in the billions.
The Money Man
In 1961, Karachi’s seething Bolton Market was an epicentre for dirty money.
Currency traders hawked US dollars from stalls and shanties, hoping to snare a passing businessman or corrupt official.
Among these street dealers was Abdul Sattar Khanani, a Gujarati who settled in Karachi after the partition of India and Pakistan.
He was a Memon, a line of mercantilists which dated to the 15th century renowned for a canny grasp of numbers. Yet the gift seemed to have skipped a generation. Abdul Khanani’s family business struggled.
Then, in May that year, his fortunes changed forever. His wife gave birth to identical twin boys, Muhammad Javaid and Altaf Sattar. The twins would soon demonstrate the knack for business that had eluded their father.
In 1984, they formed Khanani and Kalia International, or KKI. By the late 1990s, the company had transformed into one of the largest currency traders in Pakistan, with a web of remittance agents across the world.
The company’s reach relied heavily on hawala, an informal money transfer system so old it once greased the Silk Road.
When a customer in Sydney needed to send $100,000 to an associate in Dubai, Khanani’s agents in both cities ran a line of credit between each other.
The Sydney agent kept the money given to him but assigned it as a debt he owed to his counterpart in the UAE, who disbursed $100,000 from his own funds. When the time came for money to travel in the opposite direction, the reverse took place, the debt was discharged and the ledger wiped clean.
When it came to evading police scrutiny, the scheme was brilliant for its 8th century simplicity. And Khanani’s business soared.
While in 2007 and 2008 alone, KKI’s official banking records showed the company handled $2.3 billion, the Australian Federal Police told Four Corners the true figure was many times higher.
David Stewart, an assistant commissioner, said the hawala-based operation was “turning over between 14 and 16 billion dollars US annually”.
Khanani was shifting huge volumes of hard currency across the border into war-ravaged Afghanistan, much of it going to heroin producers.
Authorities believed Altaf Khanani to be a close associate of India’s most-wanted crime boss, Dawood Ibrahim, the man blamed for bombings in Mumbai in 1993 that killed 257 people. Khanani was also washing money for Al Qaeda.
The businessman was careful, however. To evade the central bank, whose headquarters were directly across the road from Bolton Market, he and his family ensured they ran the criminal transactions separately, through a parallel business.
The shadow operation had its own staff, its own computer servers, its own accounting software.
“And how money moved between these two streams, the legitimate and illegitimate, was a very clever game,” said Karachi journalist Khurram Husain.
It was a game which Altaf Khanani personally administered. He awed others with a remarkable ability to recall large volumes of transaction data. A confidential report prepared by the Pakistan federal police described him as a “mastermind”.
Later, investigators who interviewed him would marvel at the man’s intellect.
“He could recall phone numbers from memory when asked, he knew bank account numbers, business names, multiple exchange rates,” US Drug Enforcement Administration agent John Clayton said. It was “uncanny”.
Mr Untouchable: Bribery and escape
As KKI grew in prominence, it was inevitable that it would attract the interest of law enforcement.
Her Majesty’s Customs and Excise and the National Crime Agency in the UK ran complex international investigations targeting Khanani’s network from as early as 1997. They traced hundreds of millions of pounds across Spain, Italy, Germany and the Netherlands.
But Altaf Khanani would evade capture. He was cautious, and miserly. He didn’t stray from his bases of Karachi and Dubai, where the rules were lax and where he wielded political influence.
He had become indispensable to many within Pakistan’s corrupt body politic: civil servants, politicians, army generals.
“Some of the most powerful people in Pakistan and institutions in Pakistan were clients of KKI,” Husain said. It had “tremendous clout”.
Finally, a financial crisis in 2008 forced Islamabad to move on KKI. At the time, the company was handling 40 per cent of all of Pakistan’s foreign currency transactions.
On November 8 that year, the Federal Investigation Agency raided its head office in Karachi and franchises in Lahore and Abbottabad. Eight senior figures, including Javaid Khanani, were arrested. But at the time of the raids, Altaf Khanani was in Dubai.
The FIA alleged the company had illegally siphoned $US10 billion out of Pakistan. But few in the centres of power seemed to want to see the case proceed.
“For fear of their own identities being revealed,” Khurram Husain said, “a very wide spectrum of very powerful interests mobilised in order to try and protect these [KKI] people.”
The prosecution was spectacularly undermined.
In 2010, a critical affidavit omitted the names of the very KKI directors who had been originally arraigned. A new national financial crimes statute was introduced which was so full of holes that a senior FIA figure complained publicly it was “drafted by a money-launderer”.
The following year, a specially convened banking court acquitted the eight company officials, and in 2013, Altaf Khanani was also exonerated by the District and Sessions Court.
In Karachi rumours ran rife that the bribe paid was in nine figures.
It rained hard all day as they filed into the federal building in Chantilly, Virginia. There were about 100 of them in all – detectives, agents, analysts.
The building was the clandestine headquarters for the US Drug Enforcement Administration’s special operations division. On October 22, 2014, its hall filled with foreign accents.
Police from Britain, Canada, New Zealand and Australia had flown in to be briefed on the top-secret plot to capture Altaf Khanani. The work of Canberra detectives had morphed into an unprecedented Five Eyes operation.
The intelligence-sharing powers of the Western nations were being marshalled not against an espionage target, but a money-launderer. It had never happened before.
The DEA’s specialist Group 44 would be the tip of the spear. Its supervisor, Rob Cassitta, had known of Khanani – and his ties to heroin traffickers – since his days stationed at the DEA’s office in Turkey. Now, he and his team was asked to bring him down.
“The plan was to infiltrate a DEA undercover agent into the Khanani organisation,” Cassitta explained to Four Corners. They hoped to establish themselves in Khanani’s eyes, as “the highest traffickers or money launderers that we can … [and] to develop the evidence that we would then be able to indict him in the United States”.
The DEA and the ACC were confident. Posing as a cartel on the rise, they had already inserted undercover agents into Khanani’s network. They had successfully dropped small amounts of money into it from all over the world: Auckland, Toronto, The Hague.
There was only one problem. The DEA couldn’t raise more money.
“This was one of the more interesting parts of the strategy,” Grant said ruefully. If the Australians wanted Khanani, they’d have to put up the cash themselves.
Grant’s boss eventually signed off on the taxpayer funds but then he “did say to me that my arse was in the sling”.
“I get that. If you don’t take risks, you don’t get the results.”
The ACC raised $250,000, but the AFP put up the bulk of it — another $1 million. The Australians had never done anything like this before.
“Whilst it was a different approach to how we would normally go about those types of investigations, it was certainly a managed risk,” Stewart said.
By January 2014, the operation had the green light. One undercover agent told Altaf Khanani the emerging syndicate was made up of “serious guys” who needed to move more money, more quickly.
“I’ve been in the market 30 years,” Khanani replied. “Don’t worry.”
He agreed to take up to $200,000 every few days and have it wired back into an American bank. The receiving account was secretly under DEA control.
On the evening of January 7, a special agent stood in the carpark of a tired Dunkin’ Donuts franchise opposite the North Arlington public library in New Jersey. He was holding a black duffle bag. Inside was $100,000.
The money pick-up had been arranged beforehand with Khanani personally. The Pakistani money-launderer was talking directly with DEA undercover officers using an encrypted iPhone messaging service.
At one point, one of them even dialled up Khanani on Skype from his laptop.
The evidence gained from the 19-minute call was “phenomenal”, said John Clayton.
“To make sure Khanani knew that this money was drug money, we were talking plain English … we would tell him we were offloading ‘kilos’ or we had ‘white bricks’ … at some point [we] used ‘cocaine’ in the conversation.”
Once night fell, Khanani’s money courier arrived as planned. The two men compared $1 note serial numbers — one had the banknote, the other a photograph of it — and the DEA handed over the money.
Twelve days later, an obscure company in the UAE, Mazaka General Trading, wired back $96,936 – Australia’s tax money minus a 3 per cent commission. Khanani had been taken in.
The operation ramped up. Two hundred thousand dollars was dropped to him the following day, and another $300,000 within the next nine days. Khanani was picking up the money from any city they asked — Houston, Atlanta, Dallas, New York — and it was all being wired back via legitimate companies with no apparent connection to Khanani.
“It was kind of amazing to see how we can throw out a state or an area where we needed money picked up and Khanani was able to reach into his rolodex and dial up somebody to help us with that,” Cassita says.
“I was with the guys, John and the other guys in the office, and it was, holy shit this is working, we can do this as long as we want.”
Lure and capture
By the 16th of April 2015, the DEA had unassailable evidence. Altaf Khanani was an industrial scale launderer. There wasn’t a courtroom in the country that would disagree.
“Once we went to the lure and capture phase, we had to find a place that Khanani would be comfortable travelling to,” Cassitta says. They couldn’t pull him from Dubai or Pakistan.
In the February Skype call, the undercover agent had planted a seed that would help.
“You can come … if I go to Costa or Panama, no?” he asked Khanani. He said the cartel bosses “want to know who they’re dealing with”.
“I can come there, easy,” Khanani replied.
The fictitious cocaine syndicate talked up access to senior drug traffickers who wanted to shift their laundering contracts over to Khanani. The agents also promised they could corruptly procure for him a Panamanian passport.
Finally, Khanani booked a KLM flight to Tocumen International Airport in Panama, via Amsterdam.
It was scheduled to land on September 11, which Cassitta and Clayton, both staunchly patriotic, considered a sweet irony. They had agents watch him in Amsterdam to make sure he got on his connecting flight.
Once he did, they knew they had him.
“He was expecting the big trip, to meet all these big players,” Clayton says. “He had no idea.”
Richard Grant was at home in Canberra. His phone beeped.
“I looked down and there was a text with a photograph of Khanani surrounded by DEA agents in cuffs,” he says. “It was a wonderful thing.”
Watch The Billion Dollar Bust unfold on Four Corners at 8:30pm.
- Reporter: Linton Besser
- Digital producer: Brigid Andersen
- Graphic design: Alex Palmer
Read full transcript: Four Corners – The Billion Dollar Bust