'It's very easy to whiten black money in Pakistan'

It is very easy to whiten black money in Pakistan. A leading Karachi-based chartered accountant Syed Muhammad Shabbar Zaidi told Business Recorder on Tuesday that the purchase of winning prize bond numbers and phenomenon of fake exports are the easiest ways to resort to money laundering and legalising black money in Pakistan.
The term money laundering is not limited to the transfer of illegal funds used for financing terrorism only. The most popular money laundering tools at the local level are purchase prize bond numbers at market rate through this dirty money get status of white liquidity. Most of the times we observe that an individual has won several first prize bonds of highest denominations. How one person can repeatedly win first prize is a point to ponder.
Secondly, it is common practice that unscrupulous elements allegedly show fake exports transactions to the government to claim duty drawbacks legalising black money without trading anything in reality. For example, if a person has enough black money and he wanted to legalise it, the first step is to establish a fake company ie, on papers only in Dubai or any other international location to show that foreign buyers are interested in purchasing Pakistani products.
Through these bogus companies a Pakistani, who intend to legalise his money could make fake transactions in billions of rupees, giving the currency used in this trade legal status. An item worth $30 could be easily shown as of $60 in the same invoice. Following this methodology, the amount of $30 is sent to foreign buyer through Hundi and on the other hand export proceeds of total $60 are received through the normal banking channels. However, it is worth mentioning that some cost is also involved in this process.
In the next phase, it is shown in documents that exports have been made to the foreign buyer. The owner of the foreign buyer company bogusly established in the country of buying is actually the exporter in Pakistan. The actual exported goods might be cheap or of low quality having no value. On the other hand, the declared exports on the legal papers are of high quality and expensive goods being purchased by foreign buyers.
By showing exports in documents, the business transactions and foreign exchange earned from such exports become legal. Against such fake exports, foreign exchange is coming for legalisation of the black money. In the past, few leading export houses have made huge volumes of exports and suddenly vanished. It seemed that such exports transactions were done to legalise the black money.
Shabbar Zaidi suggested the government has to immediately repeal the Protection of Economic Reforms Act, 1992 to effectively check movement of foreign currencies. This Protection of Economic Reforms Act, 1992 has overriding effect on the Foreign Exchange Regulations Act, giving protection to the source of investment coming in the form of foreign currencies.
This Economic Reforms Act has been instrumental in encouraging money laundering in the country. The information about the source of investment and details of foreign assets purchased by Pakistanis could easily be obtained by repealing the Economic Reforms Act. The international tax consultant added that the foreign exchange regulations need to be further strengthened to check the authenticity of the business transactions.