Tuesday, May 1, 2018

How Pakistan's Corrupt Elite Use Trade Misinvoicing to Launder Money

Pakistan's exports have declined significantly since former Prime Minister Nawaz Sharif's PMLN party assumed power in 2013. They are down from about $25 billion in 2013-14 to about $20 billion in 2016-17.  At the same time, the nation's imports have jumped to $47 billion during this period, widening the trade deficit to a record $27 billion. Overvaluation of the Pakistani currency and CPEC related imports are often cited as a reason for it. The other, probably more important reason, may be increasing misinvoicing of trade facilitated by the people in power. Trade misinvoicing is the largest component of illicit financial outflows from developing countries, according to Washington-based Global Financial Integrity (GFI) which tracks such flows.

Trade Misinvoicing:

Global Financial Integrity (GFI) defines trade misinvoicing as "fraudulently manipulating the price, quantity, or quality of a good or service on an invoice submitted to customs" to quickly move substantial sums of money across international borders.

How does trade miscinvoicing work? Here's an example:

Let's say an exporter in Pakistan exports goods worth $1 million to a foreign country and invoices it at $500,000 through an offshore middleman.  The middleman invoices and collects $1 million from the end customer, sends $500,000 to Pakistan and deposits $500,000 in an offshore account. The result: Pakistan is deprived of the $500,000 in foreign exchange.

Similarly, imports of goods worth $1 million to Pakistan are overinvoiced at $1.5 million through an offshore middleman and the difference is kept in an overseas account. The result: Pakistan loses another $500,000 in foreign exchange. Meanwhile, the Pakistani traders and the officials facilitating misinvoicing together pocket $1 million or 50% on the two trades.  Pakistan's trade and current account deficits grow and the foreign exchange reserves are depleted, forcing Pakistan to go back to the International Monetary Fund (IMF) for yet another bailout with tough conditions.

Terror and Drug Financing:

It is not just greedy politicians, unscrupulous businessmen and corrupt officials in developing countries who rely on fraudulent manipulation of trade invoices; all kinds of drug traders, terrorists and criminals also use what is called TBML (trade-based money laundering).

John A. Cassara, former US intelligence official with expertise in money laundering, submitted written testimony for a US Congressional hearing on “Trading with the Enemy: Trade-Based Money Laundering is the Growth Industry in Terror Finance” to the Task Force to Investigate Terrorism Financing Of the House Financial Services Committee February 3, 2016. Here's an except from it:

"Not long after the September 11 attacks, I had a conversation with a Pakistani entrepreneur. This businessman could charitably be described as being involved in international grey markets and illicit finance. We discussed many of the subjects addressed in this hearing including trade-based money laundering, terror finance, value transfer, hawala, fictitious invoicing, and counter-valuation. At the end of the discussion, he looked at me and said, “Mr. John, don’t you know that your adversaries are transferring money and value right under your noses? But the West doesn’t see it. Your enemies are laughing at you.”"

Foreign Residency(Iqama):

Assets held by people in offshore tax havens are tracked by their country of residence, not by their citizenship, under OECD sponsored Agreement On Exchange of Information on Tax Matters. Pakistan is a signatory of this international agreement.  When Pakistan seeks information from another country under this agreement,  the nation's FBR gets only the information on asset holders who have declared Pakistan as their country of residence. Information on those Pakistanis who claim residency (iqama) in another country is not shared with Pakistani government. This loophole allows many Pakistani asset holders with iqamas in other countries to hide their assets. Many of Pakistan's top politicians, bureaucrats and businessmen hold residency visas in the Middle East, Europe and North America.

Loss of Tax Revenue:

Customs duties in developing countries often make up a huge part of the tax revenue collected by the governments. Trade Misinvoicing not only increases current account deficits but also worsen budget deficits by cutting tax receipts. Raymond Baker, author of Capitalism's Achilles Heel, has written about it as follows:

"The Pakistan government's largest source of revenues is customs duties, and therefore evasion of duties is a national pastime. Isn't there a way to tap into this major income stream, pretending to fight customs corruption and getting rich at he same time? Of course; we can hire a reputable (or disreputable, as the case maybe) inspection company, have the government pay the company about one percent fee to do price checking on imports, and get multi-million dollar bribes paid to us upon award of the contracts. Societe de Generale de Surveillance (SGS), headquartered in Switzerland, and its then subsidiary Cotecna, the biggest group in the inspection business, readily agree to this subterfuge. Letters in 1994 promised "consultancy fees", meaning kickbacks, of 6 percent and 3 percent to British Virgin Island (BVI) companies, Bomer Finance Inc. and Nassam Overseas Inc., controlled by (Benazir) Bhutto and (Asif) Zardari. Payments of $12 million were made to Swiss bank accounts of the BVI companies."

Aid in Reverse:

Some have called London the "Money Laundering Capital of the World" where corrupt leaders from developing nations use wealth looted from their people to buy expensive real estate and other assets. Private individuals and businesses from poor nations also park money in the west and other off-shore tax havens to hide their incomes and assets from the tax authorities in their countries of residence.

The multi-trillion dollar massive net outflow of money from the poor to the rich countries has been documented by the US-based Global Financial Integrity (GFI). This flow of capital has been described as "aid in reverse". It has made big headlines in Pakistan and elsewhere since the release of the Panama Papers and the Paradise Leaks which revealed true owners of offshore assets held by anonymous shell companies. Bloomberg has reported that Pakistanis alone own as much as $150 billion worth of undeclared assets offshore.

Impact on Economic Growth:

There's a direct relationship between investment and GDP. Flight of capital reduces domestic investment and depresses economic growth in poor countries. Lower tax revenues also impact spending on education, health care and infrastructure, resulting in poor socioeconomic indicators.

In Pakistan, for example, it takes investment of about 4% of GDP to grow the economy by 1%. Lower levels of investments in the country has kept its GDP growth below par relative to the rest of South Asia.  Any reduction in the outflow of capital to offshore tax havens will help boost economic growth in Pakistan to close the gap with its neighbors, particularly Bangladesh and India whose economies are both growing 1-2% faster than Pakistan's.


Pakistan's exports have declined significantly since former Prime Minister Nawaz Sharif's PMLN party assumed power in 2013. They are down from about $25 billion in 2013-14 to about $20 billion in 2016-17. Overvaluation of the Pakistani currency is often cited as a reason for it. The other, probably more important reason, may be increasing underinvoicing of exports facilitated by the people in power. Trade misinvoicing is the largest component of illicit financial outflows from developing countries as measured by New York- based Global Financial Integrity (GFI) which tracks such flows.

Related Links:

Haq's Musings

South Asia Investor Review

Did Musharraf Steal Pakistani People's Money?

Pakistan Economy Hobbled By Underinvestment

Raymond Baker on Corruption in Pakistan

Nawaz Sharif Disqualified

Culture of Corruption in Pakistan

US Investigating Microsoft Bribery in Pakistan

Zardari's Corruption Probe in Switzerland

Politics of Patronage in Pakistan

Why is PIA Losing Money Amid Pakistan Aviation Boom?


Riaz Haq said...

The Magnitude of Trade Misinvoicing and Resulting
Revenue Loss in Pakistan
Tehseen Ahmed Qureshi* and Zafar Mahmood**


This study estimates the magnitude of trade misinvoicing in Pakistan with
21 of its developed trading partners in 52 major traded commodities during 1972–
2013. We find that the total volume of trade misinvoicing for this period exceeds
US$92.7 billion. The gross revenue loss borne by the national exchequer due to
trade misinvoicing is estimated at US$21.2 billion. Moreover, the total net revenue
loss is an estimated US$11 billion in the form of evasion of customs duties and
export withholding tax. The annual average net revenue loss due to trade
misinvoicing is almost equivalent to 11.2 percent of the total revenue generated
from customs tariffs. We also find that customs tariffs and the interest rate are
positively associated with import under-invoicing, while improvements in the
current account balance and political stability reduce the extent of import overinvoicing.
Capital account openness is found to be insignificant in determining
trade misinvoicing.


Kar and Spanjers (2015) estimate that the sum of total trade
misinvoicing in 2013 in developing countries was US$1.1 trillion. The total
trade misinvoiced during 2004–13 is estimated to be around US$7.8 trillion
for 55 developing countries. Furthermore, trade misinvoicing accounts for
83 percent of the total illicit trade in developing countries. This implies that
illegal financial flows resulting from trade misinvoicing have a
considerable damaging impact on developing economies (Kar, 2010).
Kar and Spanjers (2015) also point out that, in the Global South,
trade misinvoicing has increased over time. Trade misinvoicing in
emerging countries is increasing on average at 6.5 percent per annum.
The total trade misinvoiced in Asia accounts for 38.8 percent of total trade
misinvoicing in emerging countries. It also has the highest annual growth
rate of trade misinvoicing at 8.6 percent. The top exporters of illegal
capital are Asian countries, including Malaysia, China, India, the
Philippines, Indonesia and Thailand. Russia is the main source of trade
misinvoicing in Europe. Illicit flows from the West are generated
primarily by Mexico and Brazil.
The first study to estimate illegal flows of capital from developing
countries due to trade misinvoicing was carried out by Bhagwati (1964). He
compares the bilateral trade data for Turkey with that of its trading
partners. He accounts for the discrepancies between the trade figures of the
partner countries by indicating that either of the two or both had exploited
their trade invoices to move capital. Given that the customs administration
in advanced countries is more likely to be simpler, transparent and
accountable relative to developing countries, we can assume that the data
for developed countries is more reliable for comparison purposes
(Bhagwati & Hansen, 1973).
Historically, Pakistan has maintained very high tariff rates and
relied on nontariff barriers (NTBs) to protect domestic industries from
The Magnitude of Trade Misinvoicing and Resulting Revenue Loss in Pakistan 3
foreign competition. Both tariffs and NTBs are seen as major reasons for
import under-invoicing. Pakistan has also offered many incentives to
promote export-oriented industrialization. While these incentives have
helped the country maintain a reasonable rate of export growth, many
exporters have also manipulated them to their advantage by engaging in
unfair and illegal practices. Such practices cause not only financial losses to
the exchequer, but also undermine the very objective of these policies.
Consequently, exporters who do not engage in such malpractices are
subject to large losses because their bargaining position in the market tends
to weaken (Mahmood & Mahmood, 1993)

Riaz Haq said...

Pak China under-invoicing


About a decade ago, it was proposed that Pakistan Customs be linked with China Custom to curb or at least minimize under-invoicing. Intermittently, there have been reports about progress towards the establishment of an Electronic Data Interchange System (EDIS) but nothing appears to have materialized until now. This month the deadline of April 30 was set for Pakistan and China to exchange trade data digitally.

Yes, the discrepancies of Pakistan China trade have undoubtedly raised many red flags. While many problems plague Pakistan’s current account that would require extensive re-hauling of the economy in the long term to fix, this is a problem that can be addressed in the short term and can save the economy billions.

One estimate suspects under-invoicing to have crossed the Rs.300 billion in 2010 on imports from China. A relatively simplified but pertinent estimation of Pakistan-China trade by PBC placed the discrepancy at $3.5 billion for 2016.

But as laudable as this measure is, assuming that its implemented timely and not left to languish for another decade, it has a number of caveats attached. Pak-China trade is not the only bilateral trade prone to under-invoicing nor is the official channel of formal trade the only avenue for nefarious activities.

A study published in 2016 by the Lahore Journal of Economics estimated more than $92.7 billion in losses from 1972 to 2013 for 52 major traded commodities for trade with 21 partners due to mis-invoicing. The gross revenue loss to the national exchequer was placed at $21.1 billion while loss of revenue in the form of custom duties evasion and export withholding tax was at $11 billion. The annual average net revenue loss due to it was roughly equal to 11.2 percent of revenue from tariffs. While trade with China was identified as one of the main culprits, it is by no means the only one.

A PBC study on under-invoicing from UAE lists a range of goods from mineral and chemicals to dyes, cosmetics and textiles on which disparities were observed. As per the study, Pakistan loses about Rs.150 billion each year to under-invoicing which is part of the Rs.600 billion lost each year due to smuggling and misuse of concessionary duties.

Among other countries, a cursory comparison between ITC data and SBP data for Pakistan’s trade with USA, Japan, and Indonesia lead to a discrepancy of nearly Rs.1.9 billion.

APTTA is another channel that is in a league of its own. In 2015, 9 out of the top 10 products imported through APTTA were recorded at values significantly higher reported exports by partner countries. The value of these discrepancies of the top 10 products alone was $1.4 billion that is nearly 60 percent of APTTA’s $3.18 billion trade (as per statistics reported by PBC based on Pakistan Customs data).

By its very nature, it is hard if not impossible to gauge the actual extent of illicit trade activities. The estimates however provide a rough guideline as to the scale of problem faced by the country. One hopes that EDIS would be implemented this time and not left to dwindle away in talks. One also hopes that this is seen as a step in the right direction, the first of many, which need to be taken to fix the chronic problems of trade figures’ disparities.

Riaz Haq said...

GFI on Trade Misinvoicing:


Trade misinvoicing has impacted emerging market and developing countries for decades by siphoning capital out of economies and denying governments vitally important domestic resources. This phenomenon is utilized for the purpose of 1) manipulating VAT taxes, customs duties, income taxes and other sources of revenue for Governments, and 2) shifting money into or out of countries in a manner that cannot be easily detected.

This reality may be manifested through:

Import Over-Invoicing
Import Under-Invoicing
Export Under-Invoicing
Export Over-Invoicing

The drainage of money out and the loss of revenue in emerging market and developing countries is in the hundreds of billions of dollars annually.

Solutions for Inspired Economies is a three-part program addressing this reality. Each part may be undertaken individually, or simultaneously, or in any order. The three components are:

Economic Analysis
Policy Dialogue
GFTrade Global Trade Pricing Database

The following materials present details on each of these components of the Solutions for Inspired Economies package.

Economic AnalysisPolicy DialogueGFTrade
Economic Analysis
Global Financial Integrity (GFI), with years of experience analyzing trade data, undertakes an in-depth analysis of a country’s misinvoicing problem. Data is drawn from two sources:

International Monetary Fund Direction of Trade Statistics
United Nations Commodity Trade Statistics Database

IMF Direction of Trade Statistics (DOTS) presents data on a country’s bilateral trade with its trading partner countries. With this data source GFI is able to appraise the magnitude of trade misinvoicing impacting a country and in many cases detect with which trading partner countries misinvoicing is most frequently evidenced.

UN Commodity Trade Statistics Database (UN Comtrade) presents bilateral trade data by country and by Harmonized System commodity code identification, enabling further examination of bilateral trade discrepancies and scrutiny of which commodity groups reveal misinvoicing most frequently.

Utilizing these two sources of data, GFI produces a thorough analysis of the magnitude of a country’s misinvoicing problem. We can determine how much of the problem stems from import over- or under-invoicing or export under- or over-invoicing. With a sufficiently long time series of data, we are often able to measure how economic and political events have influenced misinvoicing. Across shorter time periods we can estimate what revenues have been lost to Governments. And we are often able to measure the relationship of illicit financial flows through trade misinvoicing to other factors such as foreign direct investment, tax policy, social expenditures, and inequality.

The Economic Analysis provides a useful first step in determining how a country may progress in curtailing its trade misinvoicing problem.

Anonymous said...

It is a two way street Indian society appreciates and sometimes revers business people therefore companies like Tata and Reliance take their status of national champion seriously..Tata proudly displays on its balance sheet what percentage of national taxes it alone pays..


Read contribution to exchequer section.A true national champion.

Z Basha Jr said...

In your pictorial example what does the Customs invoice during shipment from our Chinese brothers show? 1million or 1.5million? If 1million then how do our banks allow forex purchase in excess of 1million? If 1.5million on customs invoice then are you implicating Chinese as well?

Riaz Haq said...

ZB: " If 1million then how do our banks allow forex purchase in excess of 1million? If 1.5million on customs invoice then are you implicating Chinese as well? "

The example I used is not unusual as a lot of international trade between countries is done via trading companies acting as middlemen.

The supplier in the example could have been American or European or any other nationality.

Riaz Haq said...

Anon: "It is a two way street Indian society appreciates and sometimes revers business people therefore companies like Tata and Reliance take their status of national champion seriously..Tata proudly displays on its balance sheet what percentage of national taxes it alone pays.."

The problem of illicit flows in India is much worse than in Pakistan.

A 2015 GFI report put Pakistan ($2 billion illicit outflow) at 109th place among 149 countries in the list of “biggest exporters of illicit capital over the decade” between 2004 and 2013. In the same report, India was ranked 5th.

China Mainland ($1.392 trillion), Russian Federation ($1.05 trillion), Mexico ($528.44 billion), India ($510.29 billion) and Malaysia ($418.54 billion) occupied the top five places after contributing the most in illicit financial flows during the period.


Riaz Haq said...

With new order on unexplained wealth, UK can seize assets of corrupt politicians, criminals
Property in London and other major cities in the United Kingdom is said to be the major destination of corrupt cash.


Corrupt foreign politicians and criminals who launder an estimated £90 billion every year through the United Kingdom will need to explain their wealth under a new law called Unexplained Wealth Order (UWO) that came into force this week, or face seizure.

Property in London and other major cities in the United Kingdom is said to be the major destination of corrupt cash. The British news media mention Russian oligarchs in this regard, but the measure applies toindividuals from all countries.

Transparency International UK has identified £4.4 billion worth of property in the UK that may be the target of UWOs. Five properties it suspects had been bought using corrupt wealth includes two by former Pakistan prime minister Nawaz Sharif in London.

Provided under the Criminal Finance Act, the UWO allows authorities to freeze and recover property if individuals are unable to explain how they acquired assets in excess of £50,000. Previously, British authorities had few powers to act unless the individuals had a conviction in the country of origin.

Ben Wallace, security minister, told The Times on Saturday that he wanted the “full force of the government” to bear down on criminals and corrupt politicians using Britain as a playground and haven: “When we get to you we will come for you, for your assets and we will make the environment that you live in difficult”.

“If they are an MP in a country where they don’t receive a big salary but suddenly they have a nice Knightsbridge townhouse worth millions and they can’t prove how they paid for it, we will seize that asset, we will dispose of it and we will use the proceeds to fund our law enforcement,” he added.

Rachel Davies Teka of anti-corruption Transparency International UK, said: “The introduction of UWOs is a significant moment in the fight against dirty money flowing into the UK. They will allow law enforcement to much more easily investigate assets that are highly likely to have been bought using corrupt money, often stolen from populations in some of the poorest parts of the world.”

“From Russia to Nigeria to the Middle East it is no secret that corrupt officials have channelled ill-gotten funds into the UK via the property market”.

Sankar Singh said...

Hmmm, first you state, "Any reduction in the outflow of capital to offshore tax havens will help boost economic growth in Pakistan to close the gap with its neighbors, particularly Bangladesh and India whose economies are both growing 1-2% faster than Pakistan's."

However, next you state, "The problem of illicit flows in India is much worse than in Pakistan.
A 2015 GFI report put Pakistan ($2 billion illicit outflow) at 109th place among 149 countries in the list of “biggest exporters of illicit capital over the decade” between 2004 and 2013. In the same report, India was ranked 5th."

Certainly, you seem to be at odds with yourself!. I believe India, being a bigger economy, will have more illicit flows. Secondly, Pakistan's economic malaise is much deeper than the 1-2% slower growth you claim.

World bank % GDP Growth 1990-2014 data:
India 6.91
Bangladesh 5.65
Pakistan 3.78

Similarly for 1980-2016
India 7.11
Pakistan 4.93

Subtract Pakistan much faster population growth and, on a per capita basis, data looks more disappointing for Pakistan.


Riaz Haq said...

SS: " Pakistan's economic malaise is much deeper than the 1-2% slower growth you claim"

GDP Growth Rate in Pakistan averaged 4.91 percent from 1952 until 2016, reaching an all time high of 10.22 percent in 1954 and a record low of -1.80 percent in 1952.


GDP Annual Growth Rate in India averaged 6.13 percent from 1951 until 2017, reaching an all time high of 11.40 percent in the first quarter of 2010 and a record low of -5.20 percent in the fourth quarter of 1979.


The difference between India's 6.13% and Pakistan's 4.91% is 1.22% over 1951 to 2017.

SS: " I believe India, being a bigger economy, will have more illicit flows. "

India also has significantly higher domestic savings rates and foreign investment (FDI) rates than Pakistan that more than make up for larger illicit outflows.

A State Bank of Pakistan report explains it as below:

"National savings (in Pakistan) as percent of GDP were around 10 percent during 1960s, which increased to above 15 percent in 2000s, but declined afterward. Pakistan’s saving rate also compares unfavorably with that in neighboring countries: last five years average saving rate in India was 31.9 percent, Bangladesh 29.7 percent, and Sri Lanka 24.5 percent..... Similarly, domestic savings (measured as national savings less net factor income from abroad) also declined from about 15 percent of GDP in 2000s, to less than 9 percent in recent years. Domestic savings are imperative for sustainable growth, because inflow of income from abroad (remittances and other factor income) is uncertain due to cyclical movements in world economies, exchange rates, and external shocks".


"The (Indian) CSO has revised the GDP growth for the FY14 to 6.1% from preliminary 6.4%; FY15 to 7.2% from 7.5%; FY16 to 8.2% from 8%. It kept the GDP growth rate for FY17 unchanged at 7.1%"


Pakistan Economic Survey 2017-18 estimated Pakistan's growth rate at 5.8%.


Riaz Haq said...

Electronic data exchange between #China and #Pakistan to go live soon to deal with huge discrepancy in #trade figures ($12 billion imports in Pakistan vs $16 billion exports from China in 2017), excise #tax evasion and #MoneyLaundering. #misinvoicing


Pakistan is on the verge of launching electronic origin data exchange, which would enable real time recording of trade between the two countries and help curb revenue evasion as well as money laundering, an official said.

Directorate General of Reforms & Automation – Customs has developed the software in this regard and user acceptance testing by Trade Development Authority of Pakistan (TDAP) has also been concluded.

“Presently, the testing of electronic message exchange through the software is in progress between the technical teams of China and Pakistan,” the official said.

The official added that the system, being developed under China-Pakistan free trade agreement (FTA), would be available for live data exchange after the completion of testing.

Imports from China constitute a significant part of Pakistan’s total imports, which opened doors for under-invoicing aimed at revenue evasion as well as over-invoicing aimed at moving out foreign exchange in an organized manner.

Finance Minister Miftah Ismail, in a recent interaction with newsmen, had said the government had detected mass under-invoicing on imports from China. The premier had also said the record at Pakistan Customs reported imports of $12 billion from China last year, while data at Chinese Customs reported exports of $16 billion to Pakistan during the same period.

A trader, requesting anonymity, said under-invoicing and revenue evasion was only a part of the damage, China-Pakistan FTA dealt to the local industry and economy.

Quite recently, Pakistan Customs detected large scale money laundering through gross over invoicing of solar PV panels imported from China, and advocated concerted efforts involving State Bank of Pakistan (SBP) and by extension commercial banks.

Earlier in June last year, Pakistan Solar Association (PSA) in their representation to Customs authorities had shared actionable information regarding money laundering through over-invoicing of solar (photovoltaic) panels and requested investigation into the matter. The investigations had revealed the said goods were being imported into the country from China at double the international market rates.

The official further said the implementation of electronic data exchange between China and Pakistan under Pak China FTA would facilitate trade and help combating commercial frauds.

Riaz Haq said...

#British National #Crime Agency (NCA) warns that #UK remains prime destination for foreign corrupt person and politicians and their families to launder money, with biggest sources of #corrupt investment being #Russia, #Nigeria, #Pakistan. #MoneyLaundering


British businesses are at risk of being drawn into corrupt practices after the UK leaves the European Union in a Brexit-driven surge in crime, law enforcement officials have warned.

UK-based companies looking to increase trade with countries outside the EU are more likely to come into contact with corrupt markets, particularly in the developing world, the National Crime Agency (NCA) said.

Brexit will also provide greater opportunities for criminals to launder money, such as investing dirty cash in British businesses that deal in high-value items such as gems and precious metals, the agency said.

In its annual assessment of serious and organised crime, the NCA said criminals would take advantage of a redesigned customs setup when the UK leaves the EU, as well as any gaps in intelligence-sharing between countries, which could lead to international fugitives evading capture.

“As the UK moves towards exiting the EU in March 2019, UK-based businesses may look to increase the amount of trade they have with non-EU countries,” the report said. “We judge this will increase the likelihood that UK businesses will come into contact with corrupt markets, particularly in the developing world, raising the risk they will be drawn into corrupt practices.”

The NCA said the result of the EU referendum would be “a key driver of uncertainty” in the next five years.

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Nikki Holland, the director of investigations for the National Crime Agency, said: “We know the criminals will adapt to what the arrangements are and exploit any loopholes. We think while there is uncertainty … the criminals will be waiting to see what the opportunities and loopholes are, to get their goods across the border during any confusion.”

As well as the NCA, police forces, MI5, MI6, GCHQ, the Border Force, immigration enforcement and the Prison Service all contributed to the assessment.

Law enforcement agencies, including the NCA, have previously warned of the risks to intelligence sharing posed by the vote to leave the EU.

Lynne Owens, the NCA director general, has , including use of the European arrest warrant and membership of Europol, amid concerns about the impact of leaving the EU.

Membership of the EU gives the NCA and UK police forces access to tools that allow them to share intelligence quickly and efficiently with European counterparts.

Before the referendum, former security chiefs, including the former head of MI5 Eliza Manningham-Buller and the former head of MI6 Sir John Sawers, had said that voting remain was in the best interests of the country’s security.

Elsewhere in the report, the NCA warned that the UK remained a prime destination for foreign corrupt and politically exposed people to launder money, with the biggest sources of corrupt investment being Russia, Nigeria and Pakistan.

“Investment in UK property, particularly in London, continues to be an attractive mechanism to launder funds,” the report said.

The NCA said that the scale of money laundering in the UK annually is in the billions of pounds.

The agency also flagged an increase in criminal gunfire on the streets of Britain. The report said the majority of weapons had not been previously used, which suggested an easy flow of illegal weapons into the UK.

Riaz Haq said...


Dr Muhammad Iqbal

Mansoor sb the very basic purpose of the scheme is that the beneficiaries of the scheme who will declare their assets or income, they cannot not be asked about the source of the income that was used to create these assets. This is the basic purpose of the scheme. The problem is that in an ideal world, there should be no need of such a scheme where every taxpayer tells their real income and assets but practically we have a large undocumented sector about both, the domestic assets and the foreign assets. Therefore, the very basic purpose of the scheme is to give one opportunity to the people so that they could once declare the things that they did not mention in their tax record and so regularize so that they could save themselves from any kind of consequences.

Mansoor Ali Khan

Dr sb another questions that comes in is a big list that appeared in Panama Leaks in which there are many names. If someone has their name in the Panama Leaks, and they want to benefit from this tax amnesty scheme, can they benefit from the scheme as well?

Dr Muhammad Iqbal

Look, this scheme has some exceptions, major being that the holders of public office cannot benefit from it. Like government employees or those who have enjoyed a political office. They cannot avail this scheme. The second important exception is that the cases, which are under proceedings in any court of law, also cannot avail this scheme. On the other hand, it does not matter that there is any mention in the Panama or not.

Mansoor Ali Khan

Shahbaz Rana sb, you heard this discussion. He said that a person can benefit, no matter their name appears in the Panama if it is not under litigation or no legal proceedings are under way. Then there is no problem. Also there is no problem for a public office holder. But there have been lot of confusions during the last ten years about the public office holders, what do you think?

Shahbaz Rana

Yes, you are very much right. You see that the scheme is effective from April 10, but people have some reservations in their minds regarding it so far. The people who want to take advantage of this scheme think that it is a very unique opportunity. The basic reason is that we have an agreement with OECD and from September 2018 Pakistan will start exchanging information with OECD. So, this is like a window of opportunity that is ending on June30, because there is very little time left, questions are arising in the minds of the people. The basic question is who can benefit and who cannot? They have said that the public office holders who held office for the last ten years cannot benefit from it. As Dr Iqbal said that everyone can benefit if even if their names appear in Panama Leaks but if their case is not in court. I want to ask Dr sb an important thing and that is that would it be mandatory for a non-resident Pakistani with a dual nationality to declare wealth statement to benefit from this scheme?

Dr Muhammad Iqbal

Look, filing or not filing the wealth statement is not the issue under the scheme. Wealth statement has to be filed according to the requirements of the Income Tax Ordinance, which is that everyone who files an income tax return will have to file wealth statement along with that. And being a dual national also does not matter. The basic concept of income tax is of a resident taxpayer. And the resident taxpayer individual is a person who has lived for at least 183 days in Pakistan in a tax year, which is also a financial year. If he has lived in Pakistan for 183 days, he has to declare his total world income in his tax return and he also has to give his wealth statement with that. But if he is not a Pakistani resident, then if he has any Pakistani source income, he has to pay tax on that.

Riaz Haq said...

Panama Papers: New leak shows Pak clients struggling to avoid trouble


A fresh batch of leaked documents of Panamanian law firm, Mossack Fonseca, reveals how panic triggered after the release of Panama Papers among the firm and its clients; several of them were Pakistanis who had to change their plans of hiding wealth abroad amid fear of yet another leak.

A person (Zaka Ashraf) nominated by PPP for interim PM, who had also been chairman of the Pakistan Cricket Board (PCB), abandoned the process of opening two accounts in Swiss banks after the Panama Papers through his two benami shell companies which came to surface earlier but their ownership was unknown.

Former attorney general Justice (R) Malik Qayyum disassociated himself from a benami company. Its Swiss bank account had Qayyum and his wife as signatories. Samina Durrani, the mother of Tehmina Durrani, “gifted” one offshore company holding property in the UK, to Asimullah Durrani, her son, a few months after the release of Panama Papers.

Meanwhile, a Pakistani banker in the Middle East, Saleem Sheikh, was found seeking explanation from the law firm about the steps taken to prevent any embarrassment in future through yet another leak.

Instead of replying to this concern, Mossack Fonseca served him notice in April 2017 together with other Pakistani passport holders having companies in British Virgin Islands to change their registered agent as “an administrative decision has been taken to resign as registered agent/office for companies with links to high risk countries.” Pakistan is among those 21 countries declared prohibited for business by BVI in April 2017. Nielsen and Nescoll, the offshore companies owned by Sharif family had changed their agent in 2014 hence no detail was found in the latest leak.


Although Mossack Fonseca announced its closure in March this year, it started resigning in April as registered agent of clients from Pakistan which is “on our current prohibited list of countries.” “Kindly however advise the client that an administrative decision was made after conducting a risk assessment to cease acting as agent for companies associated with Pakistan currently, due to the elevated country risk. “Accordingly, we suggest that they make arrangements to change the registered agent/office of the company soonest,” read an email.

There are another 20 countries which have been declared ‘High Risk’ due to money laundering and terror financing. Pakistan has been flagged due to terror financing. Other high risk countries are Afghanistan, Belarus, Bosnia, Central African Republic, Cuba, Congo, Eretria, Iran, Iraq, Lebanon, Libya, North Korea, Serbia, Sierra Leone, Somalia, South Sudan, Sudan, Syria, Yemen and Zimbabwe.

Riaz Haq said...

#Pakistan Amnesty pulls in Rs 80 billion #tax amid massive response. One #Karachi billionaire declares $1.5 billion in offshore assets.


Nearly 5,000 people in Pakistan have filed returns declaring their foreign assets and deposited approximately Rs 80 billion in taxes so far, as the government's tax amnesty scheme is set to end today.

The final amount will be much higher as more funds are in the pipeline based on payment slips issued.

A Karachi-based billionaire, Habibullah Khan, has declared liquid assets of USD 1.25 billion outside of Pakistan in the single largest amnesty declaration in the country.

Khan is the Founder and Chairman of Mega Conglomerate - Mega and Forbes Group of Companies (Mega Group - MFG), a diversified conglomerate with business holdings.

Khan made his declaration under the tax amnesty scheme announced through an Ordinance on April 10, 2018.