Tax crimes in am­bit of money laun­der­ing law

The Pak Banker - - 4EDITORIAL - Khaleeq Kiani

FACED with stiff par­lia­men­tary re­sis­tance to try­ing fi­nan­cial and tax crimes un­der the An­ti­Money Laun­der­ing Act, the gov­ern­ment has of­fered to in­crease the thresh­old amount be­yond Rs10m to meet in­ter­na­tional re­quire­ments.

Un­der the on­go­ing Ex­tended Fund Fa­cil­ity (EFF) of the IMF, Pak­istan is re­quired to amend the act (AMLA 2010), be­sides the decades-old laws re­lat­ing to in­come tax, cus­toms and fed­eral ex­cise duty to crim­i­nalise fis­cal and tax of­fences un­der the money-laun­der­ing law to com- ply with new stan­dards of the Fi­nan­cial Ac­tion Task Force (FATF).

The gov­ern­ment has ar­gued that un­less this is done, Pak­istan would be down­graded again to the FATF's grey list from which it was ex­cluded af­ter Is­lam­abad in­tro­duced var­i­ous mea­sures in Fe­bru­ary, in­clud­ing en­act­ing a a com­bat­ing fi­nanc­ing for ter­ror­ism law un­der the Na­tional Ac­tion Plan against mil­i­tancy and ex­trem­ism.

Ac­cord­ing to Fed­eral Board of Rev­enue mem­ber Shahid Has­san As­sad, the pro­posed amend­ment seeks to treat tax eva­sion of Rs10m and above as a crime un­der the AMLA, which would cover only a few Pak­istani tax evaders. This much tax eva­sion means an an­nual in­come of Rs30m and a monthly in­come of Rs2.5m, which would cover only a lim­ited num­ber of cit­i­zens, he said. This limit could be in­creased to sat­isfy the mem­bers of the Se­nate, but it can­not be al­to­gether avoided un­der in­ter­na­tional com­mit­ments.

Speak­ing on be­half of the Se­nate Stand­ing Com­mit­tee on Fi­nance and Rev­enue, for­mer fi­nance min­is­ter Sen­a­tor Saleem H. Mand­vi­walla said the com­mit­tee could not al­low the tax regime and fis­cal is­sues to be brought un­der the AMLA be­cause it would un­nec­es­sar­ily ex­pose peo­ple to ex­cesses not only at the hands of the gov­ern­ment ma­chin­ery in­side the coun­try but also at the in­ter­na­tional level.

He said the com­mit­tee did not like to pro­tect tax evaders or any­body com­mit- ting any other fis­cal crime, but it could not al­low the field staff of the FBR, State Bank, Na­tional Ac­count­ing Bureau, Fed­eral In­ves­ti­ga­tion Agency and banks to mis­use their au­thor­ity and cre­ate prob­lems for taxpayers or cit­i­zens trav­el­ling abroad. In his view, the law­mak­ers would have to be ex­tra care­ful in mak­ing laws while keep­ing their ap­pli­ca­bil­ity in mind.

Mand­vi­walla said the PPP gov­ern­ment was also un­der in­ter­na­tional pres­sure to do the same, but it had ex­cluded fi­nan­cial and tax crimes from the AMLA. "How can you al­low a po­lit­i­cal leader or a tax­payer to be de­famed in­ter­na­tion­ally on the ba­sis of re­ports by in­ves­ti­ga­tion agen­cies?"

Al­most all the mem­bers of the Se­nate panel are op­posed to declar­ing tax eva- sion as a pred­i­cate of­fence, which, if sub­stan­ti­ated, can land the of­fender in jail for up to 10 years or a slap a fine of Rs1m or both. In view of the se­ri­ous con­se­quences in­volved, a fresh round of meet­ings with all stake­hold­ers, along with in­de­pen­dent law ex­perts, would soon be ar­ranged for the Sen­a­tors at the SBP head­quar­ters.

The author­i­ties claim that amend­ments to the AMLA are also nec­es­sary so as to get a con­sis­tent def­i­ni­tion of sus­pi­cious trans­ac­tion re­ports (STRs), as dif­fer­ent agen­cies like NAB, SBP and the FIA etc de­fine the re­ports dif­fer­ently. This leads to mis­use and cre­ates com­pli­ca­tions in courts. The amend­ment also seeks to con­fis­cate or at­tach prop­er­ties of val­ues cor­re­spond­ing with the amount of tax eva­sion to the case to meet in­ter­na­tional stan­dards, which re­quire cov­er­ing the pro­ceeds gen­er­ated from a pred­i­cate or money laun­der­ing of­fence or prop­erty to the value of the pro­ceeds or in­stru­men­tal­i­ties of the crime.

Un­der the pre­vi­ous law, prop­erty ac­quired through pro­ceeds gen­er­ated through these of­fences could have been con­fis­cated or at­tached with the case. Mean­while, the agen­cies have so far frozen Rs1bn be­long­ing to pro­scribed or­gan­i­sa­tions, and that too un­der UN res­o­lu­tions. The Fi­nan­cial Mon­i­tor­ing Unit has un­til now re­ceived 5,775 STRs or cur­rency trans­ac­tion re­ports (CTRs) from fi­nan­cial in­sti­tu­tions.

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