The purpose of this paper is to provide an understanding of the different ways in which public money can be misappropriated by foreign exchange companies in developing countries like Pakistan. It attempts to highlight the importance of corporate governance, the lack of which may lead to closure of financial entities. The paper presents the incidence of noncompliance of corporate governance and discloses how ZARCO Exchange management while posing to be a due diligent company, indulged in financial embezzlement. The study unfolds the course of events that led to the identification of fraud and the consequences that were later faced by the ZARCO management.

The major objective of this paper is to report and present the issue of noncompliance and failure of corporate governance in a well known and progressing foreign exchange company in Pakistan. This study provides indispensable information about an informal and quick way of transferring money commonly known as Hawala and/or Hundi. The formal banking system of transferring funds not only entails service charges, but is also time-consuming. On the other hand, Hawala/Hundi mechanism does not follow any system; therefore, it has been termed as illegal around the world. The stand against this system of transferring money became particularly strong after the 9/11 terrorist incidents in the USA and the start of the ‘War on Terror’ in 2001. The paper highlights the issues of noncompliance and failure of corporate governance in Pakistan by discussing the fraudulent transactions at the ZARCO Exchange, a renowned global money transfer chain operating in Pakistan through their local partner, and subsequently examines the consequences of this failure at personal, organizational and societal levels.

Corporate Governance Journal, ZARCO Exchange, ZARCO, Corporate Governance Failure, Federal Investigation Agency (FIA), Foreign Telegraphic Transfers (FTTs), Lahore High Court (LHC).