Tax crimes in ambit of money laundering lawArchive
FACED with stiff parliamentary resistance to trying financial and tax crimes under the Anti-Money 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 comply 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 committing 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 evasion 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. Of these, it has passed over 1,000 to four law enforcement agencies, which in turn have arrested 270 people and frozen 200 bank accounts. However, only a few of these have reached the courts.
The FATF is an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money-laundering, terror-financing and other related threats to the integrity of the international financial system.
It has now identified smuggling, tax crimes and other major financial crimes like non-commitment of financial commitments as anti-money laundering crimes. The law requires Pakistan to meet reporting obligations in cases involving AMLA crimes as per international standards to global bodies, along with conducting customer due diligence at par with foreign standards.
The amendments are also being made in the AMLA to ensure domestic and international cooperation among agencies for investigating terror financing.
The new law proposes due diligence of customers and requires regulatory agencies like the Securities and Exchange Commission of Pakistan and the SBP to maintain a record of transactions. This was not covered in the previous law, which caused operational difficulties in its implementation.
Published in Dawn, Economic & Business, August 24th, 2015
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