Channeling money through ‘hundi’ and avoiding the legitimate financial system is one of the best methods of “whitening” dirty money. In layman words, money- laundering is conversion of dirty money into clean money through avoiding the legal financial system. The Anti-Money Laundering (AML)/Combating Financing Terrorism (CFT) Regime was put in place because of the nexus between corruption and terrorism through organized crime. To eliminate these all available governmental instruments and means, particularly NAB, FIA, Police and Financial Monitoring Unit (FMU), must be utilized.
Asian Pacific Group (APG) on Money Laundering was set up in 1997 with 36 member states to develop response to this global threat, after 9/11 the aspect of CFT was added. This Group has USA and few European countries as observers. The APG’s anti-money laundering tool kit consists of 90 recommendations, 9 recommendations being special as primary guidelines for AML/CFT measures. Initially Pakistan had NAB as its primary contact point, subsequently FMU took on this role. The AML Act (AMLA) was promulgated where FMU was required to forward suspicious transactions reports (STRs) either to FIA or NAB for prosecution. Monitoring the complete flow of banking transactions, the FMU can seek information from any person or institution. Because FMU had no mechanism of its own for investigation leading to prosecution, cases could be referred to NAB or FIA. Legal experts opine that National Accountability Bureau Ordinance (NABO) has no penal clauses to punish anyone if he is found accumulating money without legitimate means or involved in money-laundering, not a single case has been referred to so far to the courts for prosecution.
NAB can investigate AML and white collar crimes whereas Anti-Terrorism Courts (ATCs) have the powers to punish. The agencies involved, NAB, Anti Terrorist Forces (Police or Rangers), FIA and FMU must be augmented and strengthened. The Joint Investigating Team (JIT) formed for this purpose missed out the regulator of financial institutions, the State Bank of Pakistan (SBP). FMU officials dealing with money-laundering are all present bankers, they must be retired persons or they can be compromised because of career considerations.
Section 21 of NABO gives state functions to NAB in reaching Memorandums of Understanding (MOUs) for recovery of ill-gotten money from abroad. The International Cooperation Wing of NAB has six functions of 1) Mutual legal assistance 2) Extraditions/deportations 3) Liaison with central authorities and LEAs abroad 4) Liaison with foreign missions in Pakistan 5) Procuring certified evidence and 6) Agreement and MOUs with foreign law enforcement authorities. MOUs exist with various countries from where ill-gotten funds are used for terrorism through shell companies, this effort has never delivered results. NAB can initiate request to foreign jurisdictions through Ministry of Foreign Affairs to obtain evidence, execute warrants, freeze assets by lawful process of that country, transfer evidence to Pakistan, and transfer persons in custody to Pakistan. MOUs to cooperate would yet require a verdict before a court of law to provide legal assistance ranging from transfer of illegal money to extradition of accused person. In certain countries cases can be filed based on the cases decided by our courts in absentia against fugitives involved in money-laundering.
NAB has an important role not only in bringing the looted money back but punishing the perpetrators and abettors providing funding to terrorism. In 2009 the monthly budget of Tehrik-e-Taliban Pakistan (TTP) was estimated Rs 20 to 30 million monthly through smuggling, kidnapping for ransom, bank robberies, extortion and indirect funding by corrupts. At one stage certain political parties were also reported financing the terrorist’s leadership. The embassy staff is generally pre-occupied with other multifarious assignments and is not trained and/or familiar with the science of white collar crimes. There is a need to create additional posts in few Pakistani missions abroad for NAB investigators to trace out shell companies, benami properties and assets of corrupts involved in money-laundering and other crimes as required by the law.
AMLA must be amended to interdict the financing of terrorism and money trails flowing from abroad landing in the hands of suspected terrorists entities. At the G-7 summit in Paris in 1989, Financial Action Task Force (FATF) was established to act as an inter-governmental body for setting standards in fighting money laundering and financing terrorism. Despite being the worst affected Pakistan has done the least in AML/CFT Regime. Problem is not only the execution but having the legal framework. Freezing only Rs. one billion in ten years is a joke, out of almost six thousand STRs only 200 bank accounts were frozen, only a few ended up in courts. Even this was not under AMLA but under UN Resolution 1267 and 1371 against proscribed outfits. Dealing with banking circles the FIA can also handle STRs but the process under general law with available cumbersome judicial system means justice delayed, and thus denied. The provision of transferring the cases pertaining to AML to Antiterrorist Courts should be included in ATC Act. The FIA or NAB may investigate with FMU referring the cases to these agencies, but cases should be sent to ATC Courts only.
All flows to SBP and local banks within country and from outside must flow through FMU to attain a clean chit from AML/CFT regime else we are likely to face international pressure and made unable to fight terrorism with all its manifestations. As signatories to FATF and AML/CFT regimes we must fulfill our obligations. The government and SBP does not make meaningful contribution for law formulation because the flow of money to Dubai and UK by vested interests of those at the helm of affairs will be in jeopardy. Just check on how much taxes our ruling politicians pay against their real-estate holdings in London alone.
AML activities should be discreet, when beyond doubt the law should apply cogent evidence and subsequently impose heavy fines and exemplary punishments. Europe imposes US$5 million fine, this must be matched in Pakistan under AMLA Regime. AMLA must not be used for political victimization as during the previous era of Nawaz, and then later Musharraf, complete tax evasion has resulted by money flowing through parallel channels. If kept confined to five offices in the country with un-measurable unstructured discretionary powers and opaqueness in planning and spending, the public’s tax paying ratio will not improve.
Taxation revenues will only improve if we use our existing financial transaction mechanism laws properly, this will also choke flow of funds for terrorist financing. We have the laws, the need is to strengthen and implement them (with gratitude to Brig (Retd) Musaddiq Abbasi, formerly DG NAB, for his invaluable assistance).
The writer is a leading defense and political analyst of Pakistan. He can be contacted at email@example.com