ISLAMABAD: Pakistan’s efforts to avoid inclusion in the grey list of Financial Action Task Force (FATF) may have suffered a setback as the federal cabinet has refused to approve a summary sent by the finance division to notify an investigation and prosecuting agency under the Anti-Money Laundering Act (AMLA) 2010.

A statutory regulatory order, SRO611, was issued on June 9, 2016 to empower the Directorate General Intelligence & Investigation (DG I&I) of Inland Revenue to initiate proceedings against the people who had possibly laundered tax-evaded money. But the notification was struck down by the Lahore High Court (LHC) in January 2018 on the plea that it was issued by a federal ministry without the express approval of the federal cabinet.

The finance division sent a summary to the cabinet on May 3 seeking approval for notifying these powers but the cabinet, headed by Prime Minister Shahid Khaqan Abbasi, instead referred it to the law division for vetting, which could result in a sustained delay even as a FATF team is preparing to visit Pakistan to review progress made by the government towards plugging the holes in the country’s anti-money laundering framework.

The government sent its report to FATF in April, detailing the steps it has taken to meet the global body’s requirements. A team from FATF is scheduled to visit Pakistan later this month or early next month to review these steps taken for combating money laundering and terror financing.

A senior official in the finance ministry told Dawn that notifying an authority with powers to initiate an investigation and carry out prosecution under AMLA 2010 is one of the 40 recommendations formulated by the Asia Pacific Group that are required to bring Pakistan’s framework against money laundering and terror financing in line with the global body’s requirements.

Any delays in notifying these powers can also adversely affect the government’s tax amnesty scheme, which is already facing an uphill challenge in the Senate. The amnesty scheme announced last month explicitly mentioned that it would not apply to funds that are the proceeds of crime and have been laundered. But the powers to make this determination rest with the DG I&I that for the moment have been struck down by the LHC until a cabinet approval can be obtained for them.

Other agencies which exercise powers to initiate investigations and prosecution under AMLA 2010 are the Federal Investigation Agency, National Accountability Bureau and Anti-Narcotics Force.

In the past 18 months, the DG I&I has recovered Rs10 billion under the AMLA 2010 against tax-evaded money.

Ever since the AML powers of the DG I&I have been suspended, the fate of more than 270 influential people accused of laundering tax-evaded money has been left in the balance. “We can’t proceed against these people under the AML act,” the official said.

These individuals were flagged by the State Bank’s Financial Monitoring Unit for possible money laundering in certain transactions, and their cases were forwarded to the DG I&I for investigation.

According to the official, the provisions of AMLA 2010 have significantly increased the powers of the tax authorities compared to the older legislation. If in case the individual denies any criminal liability, proceedings are launched against him or her. The law allows the confiscation of property as well as the lodging of FIR against any individual refusing to pay due tax.

But the procedural delay of more than four months might have an adverse impact on Pakistan’s case during the upcoming review by FATF.

The official in the finance ministry says the suspension of the SRO at a time when the international body is already questioning Pakistan’s ability to crack down on people who have allegedly laundered money abroad without paying taxes will weaken Pakistan’s case.

Published in Dawn, May 6th, 2018