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December 15, 2018

Unchecked fake accounts cause of money laundering


December 15, 2018

ISLAMABAD: Non-existence of an institutional mechanism to check and report fake bank accounts as well as a lack of direct access by the State Bank of Pakistan to commercial banks data coupled with FBR’s failure to report trade-based money laundering to any investigation agency have led the way to a phenomenal scale of money-laundering to the tune of hundreds of billions.

The News has learnt that various meetings and presentations of the Financial Action Task Force with Finance Minister Asad Umer have brought up cases of more than 1,000 suspicious transactions by different commercial banks, money laundering to the tune of Rs218 billion through different 43 accounts and identification of 2,029 properties of worth Rs1,000 billion by Pakistanis in UAE. So much so that a private TV channel has also been found involved in money laundering besides others, including politicians, businessmen, bureaucrats, a charity organisation and benami accounts.

It was revealed during the meetings that the Karachi-based Omni group used 235 fake accounts to launder Rs94 billion while a commercial bank in Lahore also made the proverbial hay while the sun shone by laundering Rs73.7 billion through 24 accounts. Similarly, in KP, Rs49 billion were laundered through different 25 accounts, including those of Fazeel Chaiwala.

The Khademat-e-Khaliq Foundation was also found to have sent abroad Rs1.14 billion through five operators. This was all capped by a long list of properties identified by the UAE as having a value of over Rs1,000 billion brought over with the national money, The News learnt. It also learnt that the departments authorised to check money laundering complained against other for not coordinating to check money laundering. Weakness of the system was pointed out in meetings and amendments were also suggested in concerned laws, sources told this correspondent. Emphasis was to strengthen Financial Monitoring Unit (FMU) and shift its offices from Karachi to Islamabad. Then its employees which were on deputation from the SBP should be sent back to their parent department and new staff should be inducted from relevant departments, meetings emphasized.

The News learnt that meetings were informed that one of the main hurdles to check money laundering (ML) was that the State Bank of Pakistan has no direct access to commercial banks data. Then there was no institutional mechanism to check and report fake accounts to the SBP. There was general complaint against the Federal Board of Revenue that when cases were detected by the FBR officials of trade based money laundering these cases were not reported to any investigation agency.

The News learnt on authority that criteria of election of banks heads was also discussed as faulty. The meeting was informed by the participants that selection criteria for appointment of Bank presidents allows officials with bad record to control commercial banks. Then there was a practice that to sanction huge loan on fake collateral stock by different commercial banks and absent physically stock were also pledges by commercial banks. Then subsidy paid in cash by the government was also a cause of money laundering.

The meetings were informed that similar role of Security Exchange Commission of Pakistan was also discussed to allow fraudulent growth of paid up capital, The News learnt. Provision of record by commercial banks was also questioned as bank used delaying tactic.

Participants of these meetings also suggested that SBP’s regime of seizures and penalty needs improvement, Ferra should be amended empowering the FIA with more powers to check money laundering and AMLA should be amended and made cognizable.

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