Six Pakistani banks named in FinCEN leak
Six Pakistani banks have been named in an investigation on the role global banks play in money laundering by Buzzfeed News and the International Consortium of Investigative Journalists (ICIJ), for 29 suspicious transactions close to $2.5 million.
The banks named are Allied Bank, United Bank (UBL), Habib Metropolitan Bank, Bank Alfalah, Standard Chartered Bank Pakistan, and Habib Bank (HBL). All the suspicious transactions took place in 2011 and 2012.
Buzzfeed News had shared with ICIJ more than 2,100 suspicious activity reports, or SARs, filed by global banks to the U.S. Treasury Department's intelligence unit, the Financial Crimes Enforcement Network, known as FinCEN.
According to the investigation, global banks moved more than $2 trillion between 1999 and 2017 in suspicious payments, and flagged bank clients in more than 170 countries who were identified as being involved in potentially illicit transactions.
Banks file SARs when they believe a client is using services for potential criminal activity, though the filing in itself does not require a bank to stop doing business with a client.
According to the data revealed by ICIJ, 29 such suspicious transactions to and from Pakistan were flagged. Of those, the 'received' transactions amounted to $1,942,560, while the ' sent' transaction was $452,000.
Allied Bank had 12 suspicious transactions flagged, receiving $1,001170; UBL had eight transactions flagged, receiving $399,620; Habib Metro had two transactions flagged, receiving $74,980; Bank Alfalah had three transactions flagged, receiving $99,480 and sending $452,000; Standard Chartered had four transactions flagged, receiving $199,860; and HBL had one transaction flagged, receiving $167,450.
Out of the 29 transactions, Standard Chartered filed 28 SARs with FinCEN, while The Bank of New York Mellon Corp., filed one. All of these transactions took place between September and December 2012, except for one transaction that took place in November 2011.
Pakistani banks have two addictions: consumer deposits and government debt. They use the former to buy the latter, making easy dough with a few clicks on the Bloomberg terminal every month.
No wonder the Islamic banking industry has long demanded - even to the exclusion of everything else - that they be invited to the party. But Islamic banks don't just want their piece of cake. They want a separate cake of their own that tastes as good as the one eaten by their counterparts from the conventional bloc of the banking industry.
Their longstanding demand that there be a robust and liquid Islamic debt market has finally received due attention from the PTI government. It decided to roll out sukuk, or Islamic bonds, of Rs600 billion in three tranches of Rs200bn each to raise liquidity for reducing the circular debt in the power sector.
Two of the three issues have taken place so far, but Islamic banks are not happy. In fact, they are furious. "What we want are government-guaranteed sukuk whose yield is equivalent to that of PIBs. But every time there is a sukuk issue, the government ends up raising money at a cheaper rate," said Irfan Siddiqui, CEO of Meezan Bank, Pakistan's largest and most profitable Islamic bank.
Investments of Meezan Bank amounted to Rs306.5bn at the end of June, up 42.6 per cent from the preceding quarter.
'Don't save money by pushing us up against the wall,' says Meezan Bank CEO Irfan Siddiqui Issued in June, the second Pakistan Energy Sukuk (PES) generated funds for the government at the rate of six-month Karachi Interbank offered Rate (Kibor) minus 10 basis points (0.1pc).
It was the first time the government managed to raise liquidity at a rate below Kibor. This means the government will save Rs1.8bn on its debt repayment every year until the instrument's maturity a decade later.
"Two days ago, the finance adviser said at a ceremony the government would save Rs18bn in 10 years. I always tell the government: don't save money by pushing us up against the wall. Give us an instrument that is comparable to conventional instruments," he told Dawn in a recent interview.
So why did his bank invest eagerly in the sukuk if the yield was lower than expected? After all, Meezan Bank has invested Rs120bn in the first two tranches of PES.
"The only benefit to us was that we got to invest money that was otherwise lying idle," he said, adding that the bank sometimes has up to Rs30bn parked with the central bank for months because it does not have Shariah-compliant investment avenues.