August 23, 2002	Friday	Jamadi-us-Saani 13,1423

KARACHI, Aug 22: The clientele of illegal brokerage houses is diverse: Money changers. Stock brokers. Builders. Gold and cloth merchants. Cotton traders and exporters.

These illegal brokerage houses are mainly engaged in currency speculation but their activities are not limited to it: they use the money invested by their clients (in foreign currency) also in commodities. Majority of them can be easily bracketed with money launderers as their activities are mainly undocumented — and in most cases not monitored by any official agency in Pakistan.

A Dawn inquiry reveals that a top money changer of Karachi has lost several million dollars to one of these brokerage houses in the past few weeks.

There is also a long list of other investors who lost tens of thousands of dollars — and in the absence of any legal recourse — swallowed the losses quietly.

The list of the loss-makers include both businessmen as well as professionals. “Doctors being natural risk takers jumped into this business and I know some of them who returned home empty- handed,” said a source close to one of a dozen illegal brokerage houses. These houses that have emerged to the scene during past three-four years are working smoothly — with no institution around to challenge their credentials.

Dawn inquiry reveals that there are at least 14 such houses in Karachi only two of which can claim legal affiliation with global brokerage houses. The rest are mere clients of some international brokerage houses — but are operating as their agents and providing a cover to money launderers.

Interestingly they have sort of their own clearing house in Clifton that settles their daily transactions and charge a fee for this purpose. Sources in foreign currency market says this so-called clearing house settles around 3,000 roundturns daily. (Roundturn is a technical term that means one buy and one sale completed).

Sources in gold trade say that several gold merchants in the city are clients of illegal brokerage houses. “I know they are making money through gambling,” says a leading gold merchant who declines to go on record. “They place foreign currency deposits with these brokerage houses on the promise that this would be invested in the international market and a handsome return would be paid to them,” he explains. “But the money is never invested abroad properly and the investors here do not even know where the money is really being used.”

Dawn inquiry shows that cloth merchants and cotton traders — and some exporters too have been regular clients of the so-called agents of international brokerage houses. How many of them have lost to them and how many of them have earned windfalls remains a well-guarded secret though there are instances of occasional leaks amidst business rivalry.

High on the list of the clients of so-called brokerage houses are a number of builders and some stock brokers.

The builders mostly play with the money of poor people who pay them tens of thousand of rupees in advance hoping to own a house or a flat.

The reason why so many people from different walks of life are lured into currency speculation is that the return (if and when comes their way) is very big.

“I know of quite a number of people who are making $900-$1,500 per month on an investment of $10,000 in this business,” says an insider.

The network of the illegal representatives of global brokerage houses is so strong — and their marketing people so aggressive — that they have brought into their clientele even professionals including doctors and engineers.

“What makes their employees very energetic and enthusiastic is that they get fat salaries in dollars,” says one of the sources close to currency speculators.

“A young smart girl earns up to $1,800 a month commission if she introduces and handle just two customers who invest $10,000 each. Besides she also gets a monthly salary of Rs15,000-Rs20,000 per month.” Then she must be highly-qualified maybe educated abroad?

“Not necessarily. Even matriculate and intermediate girls are earning this much simply because they are more clever at winning customers than the boys.” But this does not mean that it is a no-men area. “Senior and middle level positions are occupied mostly by men who know the technical aspect of the business. Naturally they get fatter salaries and higher commission,” says one of the sources.