ISLAMABAD: An inquiry conducted by the Federal Board of Revenue (FBR) has detected alleged money laundering and tax evasion to the tune of billions of rupees by a trading company — Vicky Trading Pvt. Ltd — purportedly linked to the Bahria Town, one of the country’s leading real estate developers.

According to documents available with Dawn, proceedings against the said trading company are underway at the special court of customs, taxation, and anti-smuggling under the Anti-Money Laundering Act (AMLA) 2010. The FBR report claimed that Vicky Trading Company operated 18 accounts in various banks across the country.

“The accused admitted in its reply…all 18 accounts are solely dependent upon Bahria Town…and in both companies, all the directors are family members… The report conveyed fund inflows from Bahria Town to the bank accounts of Vicky Trading Pvt. Ltd amounting to Rs319 billion,” the report alleged, adding that the money was transferred from 2014 to 2018.

The documents showed that inquiry into the Rs23bn money laundering case was started on July 1, 2019, as a response to a complaint lod­ged by Moham­mad Ejaz, Ins­pector Intelli­gence and Investigation (Inland Reve­nue) of the FBR. The officer alleged that the directors of the Vicky Trading Company, “engaged in the business of purchase of land on behalf of Bahria Town”.

Report claims fund inflow from Bahria to Vicky Trading company is about Rs319bn; Accused company terms investigation ‘extreme action, harassment’

The inquiry pointed out “various anomalies in the account of the company and its directors were found, which prima facie, being used for the purpose of money laundering and tax evasion”.

The inquiry accused Vicky Trading Company’s directors of “knowingly and willfully” committing the offence of concealment of assets, non-disclosure of transactions of billions of rupees and tax evasion.

According to the report, following the preliminary inquiry, show-cause notices were served on the accused persons under Section 9 of the AMLA 2010.

The investigation report found that the trading company “is principally engaged in trading activities as well as to purchase and hold land on behalf of other companies”.

However, the inquiry claimed that the company admitted in its written replies that it had not purchased or held any land in its name out of funds transferred to it by other entities. It was revealed that the funds were used to purchase TDRs and later on disbursed back to Bahria Town, apparently for no economic reason.

“Investigation also revealed that the company is operated by directors or nominees only. There is no staff or employees on its payroll. In order to purchase/hold land on behalf of other companies, it is necessary for the company to have staff/employees on its payroll in order to account for and keep a record of transactions. Such non-existence of employees reveals a scheme of things on part of the directors to avoid tax and show the incoming receipts/disbursements payments from loan/debt sources in order to hide the true sources.”

The documents showed that a demand of Rs23.541 billion was generated to the company “on a discrepancy of Rs82.825 billion. Hence, it was found that the accused company received untaxed money with unclear sources in order to layer it and show it as taxed money paid back to Bahria Town as loan/advance repayment, including principal plus interest”.

The investigation concluded that “the accused are involved in offence of money laundering through predicate offence of concealment of income as they have no explanation with respect to receipt of funds from explained sources”.

Company’s response

The company Vicky Trading in its defence responded to the FBR that the investigation could assess the record from year 2017 onwards; however, it examined the record from year 2013 in violation of the AMLA.

It stated that the company was well-reputed and compliant entity to the state. It termed the investigation “an extreme action as well as harassment”.

The company claimed that they were doing business and adding revenue in the shape of heavy taxes to the national exchequer and the application of the AMLA was not specifically for the bona fide taxpayers.

It may be noted that the special court of customs, taxation and anti-money laundering is conducting the trial of accused persons, namely Waqas Riffat, Waseem Riffat, Bilal Bashir and Mohammad Awais, all the directors of Vicky Trading Company, under sections 3, 4 and Section XIIA of the Schedule-I of the AMLA. Special Judge Syed Irfan Haider is conducting the proceedings.

However, the trial is progressing at a snail’s pace as the court has issued notices to the accused persons with no further progress so far.

Published in Dawn, March 24th, 2024

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