A few years ago, the people of Pakistan were startled by the revelation that street hawkers selling milk and its by-products had millions of rupees in their bank accounts, despite being low-paid individuals. Interestingly, the account holders claimed to be completely unaware of their newfound wealth. One individual, Maqsood Chaprasi, gained notoriety due to his alleged connection to a powerful political figure. However, those familiar with the three steps of money laundering—placement, layering, and integration—were not surprised by these findings.
Money laundering, true to its name, stealthily navigates through a blurred banking system (reminiscent of the doodh wala and faluda wala) before quietly entering the international banking sector, primarily in the Western world. Exploiting privacy laws, the funds stay there temporarily, only to return to Pakistani banks, bypassing the street vendors’ accounts and landing in the hands of unsuspecting individuals.
With a foreign origin, the source of this wealth is rarely questioned, as they conveniently cite multiple overseas income sources to justify its legitimacy-the intricate steps of financial wizardry!
Ah, the mesmerizing allure of money flowing in from the ‘West’! Our colonial mindsets find it irresistible, much like parents who are dazzled by a marriage proposal from the USA or Canada. Just the mention of those foreign lands is enough to convince them that the boy must surely be toiling away in America. What he does there is as inconsequential as a pebble in a sea of dreams-all the wonders of perception!
The ill-gotten gains obtained through corruption, drug trade, smuggling, and the sinister activities of terrorists ultimately find their way back into circulation, perpetuating the very same nefarious practices. This creates a relentless cycle, as the country becomes deeply entangled in this quagmire. The vicious cycle continues unabated, ensnaring the nation in its grip, and leaving little room for escape. Just another intricacies of the tangled web we weave!
How much money is laundered each year, it is difficult to measure. However, a US department report reveals that Pakistan loses over $10 billion annually to money laundering. Global Financial Integrity (GFI) ranks Pakistan as the 23rd largest source of illicit financial outflows, averaging $11.8 billion per year between 2005 and 2014.
Pakistani economist Ishrat Husain estimates that illegal wealth in Pakistan represents 56% of GDP, approximately $200 billion. This figure is derived from the discrepancy between national income accounts and household income and expenditure surveys, reflecting the size of the informal economy.
The powerful mafia has financial wizards who help them conceal their black money. If at all caught, the corrupt and inefficient investigator is easy to be bribed, snubbed, and silenced forever if he does not toe the line. How much the judicial system is effective, can be judged by the fact that perhaps no one has been punished so for the crime-eating country’s economy like a termite.
Coupled with it is Hawala and Hundi system, which is operated outside the formal banking system but through a third party. Though it is also used to transfer illegal money, those who want to transfer their white money for their legitimate purposes find this alternative means convenient because the formal banking system is tedious, expensive, and users inimical. Sometimes they do not even know that it is illegal.
The expats sending money to their families from abroad through Hundi or Hawala are unaware of how much harm it could cause to their country’s economy. Money laundering is affecting Pakistan’s financial system deeply. It leads to a loss of tax revenues and disrupts the financial sector. Legal integrity is eroded, and corruption and crime are fostered. Overall, development and growth are hindered.
Thanks, FATF sword hanging to keep Pakistan on the grey list forced the government to impose stringent rules in opening bank accounts, sources of income, and questioning the arrival of large amounts of money. Otherwise, the powerful elites were in no mood as the shabby system was helping them to continue with their money-cleaning mission.
As the money launderers are rich and influential, they are always exonerated, taking advantage of the exhausted criminal justice system. There were a few instances that were ‘open and shut cases,’ but the looters were able to deceive the system and went scot-free.
As the crime and country’s financial position has crossed the alarming level, we need to deal with the matter of war footing. The lack of resources, technical expertise, political instability, and the deep ingress of the money laundering system makes it difficult to control the menace, which if not addressed effectively, will harm the country’s financial stability, and increase the crime and the perils of terrorism.
The international community can help us in this regard significantly. Pakistan must seek technical expertise and resources to effectively monitor and regulate illegal transactions. This can include sharing best practices and expertise on anti-money laundering (AML) and countering the financing of terrorism (CFT) measures.
The privacy of account holders should be disregarded in case of suspicious financial transactions. For sharing of information and intelligence and cooperating with Pakistan in investigations and prosecutions of hawala/laundering-related crimes, the FIA and foreign office must join hands to pursue the matter vigorously.
In the past five years, FIA’s relentless pursuit against money laundering has yielded some fruitful results. With 703 cases prosecuted, 38 arrests made, and 22 convictions secured, justice has begun to show its teeth. Fines amounting to 14.14 million were imposed, and an impressive 167.24 million was confiscated-message that crime doesn’t pay-The wheels of justice turn slowly but grind exceedingly fine.
But the crux of the matter is that the money illicitly funneled abroad belongs to Pakistan and should be returned to its rightful owners. The amassed wealth of the elite, tainted by untaxed and clandestine dealings, must face consequences.
The writer holds a doctorate in politics and international relations-has served as a federal secretary and inspector-general of police. He tweets @KaleemImam.
Email: [email protected]; fb@syedkaleemimam
