Customs recommends central bank’s help to check over-invoicing, money laundering

KARACHI: MCC Appraisement West has detected large scale money laundering through gross over invoicing of solar PV panels imported from China, and advocated concerted efforts involving State Bank of Pakistan (SBP) and by extension commercial banks.

In a letter to Chief Tariff & Trade – FBR, Collector Appraisement West Ashad Jawwad noted that whereas the issue of over-invoicing/money laundering has only recently been highlighted by the Pakistan Solar Association (PSA) in their representation, MCC Appraisement West had shared actionable information/data in June 2017 with the Directorate of Intelligence & Investigation-FBR, Karachi being notified law enforcement agency to investigate the offence of money laundering.

In order to examine whether there has been any substantial change in the aforesaid pattern since the above referred alert, scrutiny of a few consignments as well as the profiles of the suspected commercial importers was again carried out and it was found that as against the actual values in the range of 30 to 45 cents/watt, some of the major suspected players are still declaring, values of 70 cents/watt or more. This translates into almost 100 percent over-invoicing of the said goods imported from China.

Based on the analysis of quantum of imports vis-a-vis the declared import value, some of the major suspected players involved in over-invoicing/money laundering include M/s Syed Muhammad and Sons Trading Company, M/s J.B. Shoes, M/s Sea Trade Company, M/s Royal Zone (Pvt) Limited, M/s Sky Linker Business Chain (Pvt) Limited, M/s Khan Muhammad Enterprises, M/s Sky Linkers Trading Company, M/s Power Point Traders and M/s Bright Star Business Solution (Pvt) Limited, cumulatively they imported solar panels from China valuing Rs80 billion till March 2018.

The above list is merely indicative and not exhaustive. Nevertheless, it throws light at the scale at which the phenomenon has spread and keeping in view these figures, the quantum of money laundering done through over-invoiced imports of solar panels, as estimated by the PSA, may not be much out of proportion.

While the importers when confronted could not justify the value of 70 cents/watt or more, however, after this intervention, these importers have started declaring values in the range of 35 cents/watt, which puts a stamp of authenticity to the finding as to how the completely duty free regime for solar panels was being misused.

Collector Ashad Jawwad said whereas in the context of government’s policy of promotion of renewable energy in the country the option of imposition of duty on the solar panels may not be persuasive option, however, a concerted effort is required to check this phenomenon.

He proposed the Directorate General of Intelligence & Investigation-Customs may be asked to expedite the investigation into the matter and share the findings with clearance formations; Directorate General of Valuation may be asked to issue a suitable valuation ruling with average values based upon actual sale price of different branded/non-branded solar panels in the local market; this information may also be shared with the State Bank of Pakistan (SBP) for initiation of appropriate action, besides giving directions to the commercial banks for exercising due diligence while issuing Electronic Import Form (EIF) for this item.

The clearance Collectorates may be directed to keep a vigil for reporting the suspicious imports/importers for appropriate action; and the Inland Revenue authorities may carry out an audit of the suspected entities to examine the actual financial worth of the suspected entities, their source of funding etc.

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