Mis-declaration, under-invoicing cases to be processed under money laundering laws

KARACHI: The Directorate of Post Clearance Audit (PCA) has initiated scrutiny and analysis of last five year data comprising FIRs lodged for under-invoicing, mis-declaration and over-invoicing, Order-in-Originals and Contravention Reports served on importers and traders.

The cases of under-invoicing, mis-declaration and over-invoicing would now be processed under Anti-Money Laundering Act also. First case has been lodged against M/s Megaplus Pakistan, wherein the authorities are determining the means of illegal transfer of funds from Pakistan.

Ministry of Finance has reportedly assigned Directorate of Post Clearance Audit (PCA) and its high profile officers including Director PCA Ashraf Ali Additional Director Farrukh Sajjad, Deputy Director Shoaib Raza to detect under/over invoicing and mis-declaration, and forward these cases to Customs Intelligence and Investigation for proceedings under money laundering law.

Director I&I Irfan Javed has formed an anti-money laundering team comprising Additional Director Ali Zaman Gardezi, Deputy Director Saad Ata Rabbani,  and Superintendent R&A and AML unit Fakhar Shah. Fakhar Shah is a very competent officer and has detected mega scams of import and exports.

Customs I&I has the authority to do cases under money laundering law. I&I has to file a reference before the court and seek permission to proceed under the money laundering law.

Money laundering is the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions. The overall scheme of this process returns the money to the launderer in an obscure and indirect way.

While formal remittances refer to those remittances which enter a country through official banking channels, informal remittances include those money transfers which occur through private, unrecorded channels. These unrecorded movements of money is also money laundering.

In cases of mis-declaration and under-invoicing, only a part payment of the imported goods is made through formal channel i.e. LC and these amounts are mentioned in the I-Form, while the rest of the payments are made through informal channels. Therefore, the authorities have decided to pursue these mis-declaration and under-invoicing cases under money laundering law.

However, the importers and traders are of the view that mis-declaration and under-invoicing are not money laundering and these laws should not be applicable in these cases. Authorities believe that precious foreign exchange was being transferred through over-invoicing in which multi-national companies, local manufacturers and pharmaceutical companies were involved. Similarly, a large amount of money is illegally being transferred against declared import of low value goods, while the goods coming in were high value. On one hand money is illegally being sent abroad while on the other hand government was deprived of revenue.

Government plans to discourage imports in order to promote local manufacturing and expand exports, and all these exercises are aimed to discourage imports. However, unless and until smuggling is controlled, none of these efforts would be much fruitful.

Officials say government will not be able to control smuggling since there is a very long border and the unscrupulous elements have developed their connections in border forces, security agencies, law enforcement agencies and politicians. Higher taxes give big margin to smugglers, which need to be reduced through easing taxes and reducing cost of doing business.

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