Changes to laws against money laundering finalised

Updated 02 Oct 2018

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Govt amends laws to strengthen checks on money laundering. — Photo/File
Govt amends laws to strengthen checks on money laundering. — Photo/File

ISLAMABAD: To contain illegal outflow of money from the country and fulfil international obligations regarding terror financing, the federal government on Monday finalised amendments to the laws for strengthening institutional framework and punitive regime.

The amendments proposed to the existing FIA Act, 1974; Foreign Exchange Regulation Act, 1947 (FERA); Customs Act, 1969; and Anti-Money Laundering Act, 2010 were reviewed at a meeting chaired by Finance Minister Asad Umar on Monday.

Aimed at enhancing the role of Federal Board of Revenue (FBR) and Federal Investigation Agency (FIA) in checking hundi, hawala and other ways of illegal transfer of money as well as tax evasions, the proposed changes to the law, which were finalised at the meeting, would soon be submitted to the prime minister.

Minister reiterates government’s resolve for an effective campaign against the transfer of funds through hundi, hawala

The meeting was attended by the attorney general, finance secretary, law and justice secretary, commerce secretary, additional secretary of foreign affairs, State Bank governor, special secretaries of interior and finance besides senior officers of the FBR, State Bank’s Financial Monitoring Unit, FIA and National Accountability Bureau.

Pakistan is already under pressures from Financial Action Task Force (FATF) over action against money-laundering and terror funding. FATF works to identify national-level vulnerabilities in collaboration with other international stakeholders to protect the international financial system from misuse.

At the meeting, the finance minister reiterated government’s resolve for an effective campaign against money laundering and transfer of money through non-banking channels, hundi and hawala. The meeting was informed that the anti-money laundering act of 2010 had multiple stakeholders including the State Bank of Pakistan (SBP), the FBR and the Securities and Exchange Commission of Pakistan (SECP).

An amendment to anti-money laundering act was proposed to include the role of the FBR in checking tax evasions. The meeting was apprised that the FBR has a key role in containing illegal transfer of money particularly currency smuggling. It was decided that the role of FBR’s customs department, too, will be enhanced in containing smuggling of currency mainly dollars from the country.

As the customs department and the FIA are responsible to check the human carriers smuggling currency out of the country and the amendments have proposed to recommend stringent punishments for the smugglers.

It was suggested that the FIA’s role be enhanced to contain hundi and hawala (shifting of wealth out of country or vice versa without any physical movement of currency).

“This mode is very common and it even has the blessing of certain religious segments who claim that the use of a banking channel was not Islamic,” said an FBR official.

Explaining the system of hundi and hawala, the official said: “This money transfer is based on mutual trust only. If somebody wants to send money to their family or friend they approach the person dealing in hundi, and give the money in local currency and tell the details of its receiver. The hundi handler has contacts in many countries and will forward the information to his business partner in that country. The partner or the sender will call the receiver asking him to collect the money in currency of that country,” the official added.

Published in Dawn, October 2nd, 2018