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FBR goes after bitcoin traders

Updated May 25, 2017

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Bitcoin is sometimes used for money laundering because of the decentralisation of peer-to-peer online transactions and their anonymity. No laws currently regulate the trade in bitcoin.—Reuters
Bitcoin is sometimes used for money laundering because of the decentralisation of peer-to-peer online transactions and their anonymity. No laws currently regulate the trade in bitcoin.—Reuters

ISLAMABAD: The top intelligence department of the Federal Board of Revenue (FBR) is investigating cases where investors trade digital currencies probably to evade taxes or launder money.

The State Bank of Pakistan (SBP) does not recognise cryptocurrencies, such as bitcoin. These digital currencies are also traded as commodities.

A senior tax official said people evade tax and launder money using cryptocurrencies. They buy bitcoin to launder their tax-evaded money, he said, adding that they park their black money out of Pakistan in many cases.

The anti-money laundering cell of the Directorate General of Intelligence and Investigation, Inland Revenue (I&I-IR) started investigating on Wednesday the financial affairs of people having huge investments in cryptocurrencies, including bitcoin.

Tax evasion is a predicate offence under Anti-Money Laundering Act 2010. The government has appointed the Directorate General of I&I-IR as investigating and prosecuting agency in cases where tax-evaded money is laundered.

According to the tax official, the trade of bitcoin is on the rise in Pakistan. The initial inquiry revealed that bitcoin is being traded mostly against cash in the country.

The current price of bitcoin is hovering around Rs200,000. Upon receipt of credible information, the Directorate General of I&I-IR undertook a search to trace the trade.

Summonses were served on major traders of bitcoin for further investigation. As per a report published online, the trade volume of bitcoin in Pakistan increased 400 per cent during December 2016 alone.

Bitcoin is sometimes used as a tool for money laundering due to the decentralisation of peer-to-peer online transactions and their anonymity. No laws currently regulate the trade in bitcoin.

According to the tax official, the inquiry showed major traders of bitcoin are employed in a multinational telecommunication company in Islamabad. They also maintain bank accounts in a few other countries.

However, they were not reporting their business activities to the tax authorities, which gave rise to the suspicion of money laundering.

The tax official said there is a high chance of tax evasion and money laundering in the trade of cryptocurrency.

Therefore, an in-depth probe is being carried out to gauge the actual quantum of bitcoin trading and scrutinise whether its income is being properly reported under the tax laws.

Published in Dawn, May 25th, 2017