The Federal Board of Revenue has informed the National Accountability Bureau (NAB) that the frequent use of Hired Mechanical Transport (HMT) of private transporters to carry Afghan transit cargo and Isaf/Nato containers facilitated crime of missing containers under the 'Isaf Containers Scam.'
Sources told Business Recorder here on Wednesday that the FBR has submitted a report to the Director General NAB on the 'Isaf Containers Scam' for initiation of criminal investigation against the persons involved. The FBR letter to the NAB elaborated serious loopholes in the customs clearance system, which resulted in missing of thousands of containers under the 'Isaf Containers Scam'.
The FBR informed the NAB that the HMT was allowed by the Board in January 2006, as an exception/one time measure. The use of HMT was made a norm without any authorisation of the Board. The investigation has revealed that the concept of HMTs was abused without putting into place proper system of checks and hence was a major factor facilitating the crime, as National Logistic Cell (NLC) reduced itself to a mere conduit of authorising private transporters to carry transit cargo on its behalf and the Preventive Collectorate, despite fully aware of the situation, did nothing to stop the malpractice.
Sources said the Pakistan Customs Container Security System (PaCCSS) notified vide Customs General Order (CGO) No 04/2007 had an in-built check to block reloading of cargo by such transport units which had earlier lifted transit cargo but the containers so lifted had not been desealed at border in PaCCSS. It was a crucial pre-emptive check in the system to ensure that the system of sealing/desealing would help in ensuring due arrival of goods at destination. This check was disabled in 2007 on the directions of the then Chief Collector (South) and Collector (Preventive) reducing the PaCCSS to a mere farce as far as pre-empting the stated mechanism of crime is concerned which rested on the malpractice of HMTs.
The FBR has further informed the NAB that thousands of containers transported through so-called HMTs still appear in the PaCCSS as have not been de-sealed in the system. Non-desealing of containers in the PaCCSS was a major alarm regarding non-arrival of the cargo at the destination, It is shocking to see that no attention whatsoever was paid by the Preventive Collectorate, Karachi, which had the control and custody of PCCSS to this alarm in gross violation of PaCCSS and hence the crime continued in perpetuity on account of this willful failure.
Details of thousands of containers appearing as not de-sealed were also available to the border Collectorates on PaCCSS. The border Collectorates should have immediately raised alarm regarding non-arrival of these containers at the designated border stations but if is astonishing to note that they wilfully opted inaction in this regard, thus effectively forestalling any detection of the crime on the one hand and enabling its perpetuation on the other, sources said.
The FBR has further informed the NAB authorities that it is also shocking to note that thousands of containers appear in the PaCCSS as de-sealed but their corresponding proof of arrival and cross-border at the exit stations is missing. This proves that false entries were fed in the system to show arrival of thousands of containers at the border station, which never reached there and were in fact pilfered/smuggled en-route.
During the course of investigations numerous instances of serious illegalities, irregularities, wilful non-compliance and systemic issues have been identified which facilitated the commission and perpetuation of the crime on the one hand and its cover up on the other.
The FBR has informed the NAB that an unrelenting perpetuation of the crime where thousands of containers go missing before reaching the destination was not an accidental affair, but has all the bearings of an organised, planned crime. The size and scale of the scam indicates that its commission and perpetuation was not possible without patronage and protection of the senior management in the field as well as FBR Headquarter. The quantum of revenue loss and everyday occurrence of the crime indicates complete failure of command and control on the part of senior management and blatant disregard of assigned functions.
With some exceptions, the system mostly relied on manual procedures and lacked transparency. No meaningful effort was ever made to put into place an integrated automated system. At a time when a lot of investment was being made in automation of systems and procedures as part of FBR Reforms, the transit trade clearances continued to be handled through manual registers and Afghan Transit Trade Invoices.
Whatever modicum of automation introduced in transit trade handling, it was deliberately kept a compartmentalised patchwork of isolated software with no common interface between the Collectorates of Clearance at Karachi with the Collectorates of destination at Chaman/Torkhum, sources said.
The FBR has informed the NAB that the flawed and isolated automation ensured perpetual reliance on manual documentation. This virtually eliminated any chance of conducting reasonable reconciliation of consignments originating from Karachi with those arriving at Chaman or Torkhum for proper accounting and finding the missing/en-route pilfered consignments. This could not be attributed to bona tide oversight. The Afghan Transit cargo unloaded in KICT/PICT/QICT was being unauthorizedly shifted to KPT. No check was put into place to regulate this phenomenon.
The NAB was further informed by the FBR that there was unauthorised de-stuffing of AT cargo within port premises at Karachi. The system (manual and computerised) in place did not record the crucial fact of cross-stuffing of the containers from original containers to altogether new containers. There was no entry of the new containers on the GDs, ATTIs, etc, in the system. This prevented any meaningful tracking and reconciliation of such cargo and helped commit and cover up the crime.
Basic framework of clearance and reconciliation was provided under Public Notices issued by Model Customs Collectorates of Appraisement and Port Qasim. Serious violations of these instruments were committed which went unchecked. It was pointed out that the Jawaznama (license of import issued by Afghan Government) linked the imports claimed to be transit goods with the Afghan importer. No meaningful verification of the Jawaznamas was conducted to ascertain bona fides of the transit goods.
Under the Public Notices it was responsibility of the Appraisement or Port Qasim Collectorates to officially send three copies of the Allis to the border Collectorates for further processing. However, in most of the detected missing containers, due dispatch of the Allis to border Collectorates could not be proven. instead, these ATTIs were handed over to the criminals for forgery. The forged ATTIs or cross border certificates (CBCs) were placed in the record of Appraisement and Port Qasim Collectorates to fraudulently prove that the consignments cleared there against had crossed the Pak-Afghan border. This was meant to cover up the crime. No manifest clearance of the Afghan Transit imports was conducted during the period January 1, 2007 to December 31, 2010 and failure on this crucial aspect kept the crime in dark.
Despite the fact that the issue of pilferage of AT cargo came up for discussion during various Collectors Conferences held in the Board, no any meaningful monitoring and reconciliation mechanism was put into place. The failure on this account is deliberate and criminal.
The FBR has further informed the NAB that the commission and perpetuation of the crime at the massive scale is its own proof of an alarming management failure. The crime could not have assumed the persistence and the scale had the higher management fulfilled its administrative and legal obligations with diligence, sense of responsibility and focus. It goes without saying that such massive crimes thrive in an environment of corruption and nepotism. Posting profiles of some of the officers/officials found involved in the Scam indicate patronage and protection of the upper hierarchy.
The Board has issued directions to the concerned offices for immediate transfer of complete record of aforesaid cases to the NAB, including the adjudged amount of duties/taxes and penalty, for further necessary action. Moreover, the probe committee is fine tuning more cases for initiation of criminal proceedings, which would also be transferred to NAB in due course of time.
Sources added show cause notices to the importers, clearing agents, border agents and the National Logistics Cell (NLC) in most of the cases have been issued and the remaining, including 3398 Nato/Isaf containers, are being issued. Besides FIRs are also being lodged for determining criminal liability of the culprits and so far a list of about 580 containers has been forwarded to the Directorate General of Intelligence & Investigation - FBR for lodging FIRs against the culprits including customs officials. More cases are also being analysed for fixing criminal liability, the FBR letter to the NAB added.