KARACHI: The Directorate of Post Clearance Audit (PCA) South has uncovered massive money laundering in the solar panel import, involving a staggering Rs69.5 billion.
The audit, which revealed over-invoicing totaling an astounding Rs 69.5 billion, has raised concerns about the illicit transfer of funds out of Pakistan and highlighted the presence of black money within the country.
According to official sources, the National Accountability Bureau (NAB) has taken swift action in response to the alarming findings, collaborating with the Federal Board of Revenue (FBR) to ensure that those involved in this fraud are held accountable.
Import of solar panels: SBP asks govt to prepare list of ‘reputable’ suppliers
The substantial amount of money involved in the over-invoicing and trade-based money laundering necessitates the NAB’s intervention to bring the culprits to justice and safeguard the economic integrity of the nation.
To prevent further money laundering and over-invoicing risks, the State Bank of Pakistan has urged federal ministries to compile a list of reputable solar panel importers who can continue their operations without the risk of engaging in such illicit activities, they said and added that the findings of the FBR’s audit will play a vital role in this process. The audit’s discoveries shed light on importing solar panels at prices significantly higher than their market value.
The audit, carried out by Director PCA South, Sheeraz Ahmed, and his team on the instructions of FBR, focused on 6,232 Goods Declarations (GDs) from 63 importers, revealing a clear pattern of over-invoicing.
Furthermore, a substantial portion of the funds used for these imports is believed to be illicit money transferred out of the country. This operation has facilitated trade-based money laundering to exploit the duty and tax-free import regime applicable to solar panels.
Regarding income tax declarations, 39 importers exhibited a significant discrepancy between their financial worth (equity and liabilities) and the volume of imports. These 39 importers, with a combined financial worth of Rs. 14.7 billion, imported over Rs. 201 billion solar panels.
Additionally, scrutiny of bank-account transactions involving 44 importers revealed cash deposits amounting to Rs. 47 billion, representing nearly 24% of the total bank deposits of Rs. 193 billion. Numerous bank accounts received “cash transfers” exceeding Rs. 10 million in a single transaction.
In contrast, many accounts recorded annual cash transactions exceeding Rs. 20 million. According to the Financial Monitoring Unit’s red flag indicators, such activities classify these importers and bank accounts as high-risk for potential money laundering.
Furthermore, 22 importers with solar panel imports worth Rs. 50 million or more transferred Rs. 16.5 billion to third countries, notably the UAE and Singapore, despite the origin of the imports being China. Commercial banks allowed these import remittances to third countries without obtaining a No Objection Certificate (NOC) from Chinese exporters, thus violating Foreign Exchange Regulations and SBP’s instructions on managing risks related to trade-based money laundering and terrorist financing.
The PCA’s audit observations are currently being issued, and further scrutiny of available records will be undertaken to facilitate necessary legal action under relevant law provisions. Several violations and offenses have been identified, including fiscal fraud involving physically non-existent importers, the use of shell companies and dummy owners, and the misdeclaration of the value of imported solar panels to transfer funds out of Pakistan through over-invoicing, amounting to an astonishing Rs. 69.5 billion.
Trade-based money laundering poses a significant threat to the economy, undermining legitimate trade, compromising fiscal revenues, and facilitating the transfer of illicit funds across borders. The exposure of this massive scam emphasizes the urgent need for more robust regulatory measures and enhanced coordination among relevant authorities to combat such criminal activities effectively.
The proactive actions taken by the FBR and PCA formations are crucial in combating financial crimes and protecting the country’s economic interests. As the investigation progresses, the authorities must ensure that the culprits face strict legal action, preventing similar incidents in the future.
Copyright Business Recorder, 2023