“Pakistan is a destination and transshipment point for diverted shipments of acetic anhydride (AA) and other precursor chemicals used in the production of heroin and amphetamine-type stimulants…Data from UNODC’s Container Control Programme for Central Asia indicated that more than 100 metric tons of heroin were seized in Pakistan between February and August of 2022, likely originating in Afghanistan and primarily destined for Great Britain”—International Narcotics Control Strategy Report (INCSR, Vol. I, March 2023)
Monday, June 26, 2023 marks as International Day against drug abuse and illicit trafficking as decided by the United Nations General Assembly in 1987 to raise the level of awareness in the international community about the dangers of drug abuse, to prevent its spread and to encourage all efforts to combat the menace at international level. Each year the United Nation Office on Drugs and Crime (UNODC) selects theme for the day and this year the theme is “People first: stop stigma and discrimination, strengthen prevention”.
Successive governments in Pakistan have provided tax amnesty schemes to facilitate money launderers, tax evaders, the corrupt and plunderers of national wealth in the name of “good economic measures” (sic) and/or mobilizing tax revenues—unfortunately these were tacitly approved or not interfered with even by the country’s highest court observing “we cannot intervene in policy matters” and “we will not intervene in the tax amnesty scheme and if the scheme fails, the government will be responsible for it”. These observations were highlighted by one of the biggest online realtors in the country as immovable property in Pakistan is an established sanctuary for shady money. Resultantly, tax evaders, drug barons and persons engaged in other organised crimes, availed “legal means” to whiten assets worth billions under the State patronage.
Till recently, anybody could bring money in Pakistan or remit outside through normal banking channels without being probed by officers of Federal Board of Revenue (FBR) and Federal Investigation Agency (FIA) about its ‘source’—courtesy the Protection of Economic Reforms Act, 1992 [“PERA 1992”]. This law was amended by Finance Act, 2018 to withdraw blanket immunity from probe.
In other parts of the world through asset-seizure legislation, governments confiscate unlawful assets/dirty money and punish offenders—Pakistan has yet to pass any such law. Law of once complete and blanket immunity, PERA 1992, was the brainchild of Muhammad Ishaq Dar. He is presently fourth-time federal finance minister and economic wizard of Pakistan Muslim League (Nawaz) and samdhi (in-law) of three-times elected Premier Nawaz Sharif, disqualified for life time and ousted from politics by the Supreme Court of Pakistan in a case which is considered highly controversial. He was punished in an Iqama matter whereas the case recommended by the Joint Investigation Team (JIT) was for non-furnishing of money trail by the accused for buying the expensive Avenfield apartments (Mayfair properties) in London through offshore companies.
In the Income Tax Ordinance 2001, promulgated on September 13, 2001, a special provision [section 111(4)] was inserted, facilitating tax evaders and criminals for laundering their ill-gotten money through banking channels, surrendering the foreign currency to the State Bank and getting Pakistani rupees as encashment. This was done by a military dictator, General Pervez Musharraf (late), through a Presidential Ordinance. Thus both civilian and military regimes have extended immunities from probe into sources of shady funds. The Finance Act, 2018 placed a limit of Rs. 10 million for exemption from probe, which was later reduced to Rs. 5 million through the Finance Act, 2021 with effect from July 1, 2021. Now, the Finance Bill 2023 has proposed to enhance it to an amount equal to US$ 100,000 with effect from July 1, 2023.
During the first government of Mian Muhammad Nawaz Sharif, many schemes like Bearer National Fund Bonds, Foreign Exchange Bearer Bonds, Special Bearer Bonds, US Dollar Bonds and Certificates were introduced to decriminalize dirty money [Economic Disaster under PML (N), address by Leader of Opposition, Mohtarma Benazir Bhutto, to Peshawar High Court Bar Association on December 3, 1998—Benazir Bhutto: Selected Speeches from 1989 to 2007]. Since the era of General Muhammad Zia-ul-Haq [1977-1988], black economy has been flourishing at an amazing rate. According to various studies, the parallel economy is growing at an alarming rate of 20% per annum since 1980.
A 2010 study by State Bank of Pakistan, ‘The Size of Informal Economy in Pakistan’, estimates the size of informal economy at around 30% of GDP. It means that since 2010 annually some 1500-2000 billion rupees are generated by parallel economy (informal, though not illegal). Black money, generated through organised criminal activities e.g. bribery, kidnapping for ransom, rent-seeking, smuggling in goods and narcotic trade etc. is about Rs. 3000 billion per annum that does not appear in the study of SBP but documented in Pakistan: Enigma of Taxation. Another study—Pakistan: Drug-trap to Debt-trap—estimated the total figure of informal economy at US$ 200 billion in 2003.
Pakistan is one of the countries worst hit by tax evasion, corruption, terrorism and money laundering. There is sufficient evidence that militant groups working against the security and stability of the State generate huge funds through criminal activities and also get huge “donations” from “sympathizers” in and outside Pakistan. Yet, hardly any prosecution is reported under the provisions of Anti-Money Laundering Act of 2010. The banks do not diligently report suspicious transactions required under section 7 of Anti-Money Laundering Act, 2010 or section 67 of Control of Narcotics Substance Act of 1997. This shows the slackness of institutions and regulators/agencies responsible for implementing these laws.
The illicit trafficking in drugs is not possible without the connivance of police that has political connections and backing. The case of Lyari in Karachi is a classic study. It is sad to note that nobody has exposed the scandal of ephedrine in proper context—its business and political connections. The so-called experts writing on ephedrine in media do not even know how ephedrine is abused (many erroneously call it ‘poor man’s cocaine’ whereas it is a main ingredient of ‘ecstasy’ and is consumed by the rich who can spend thousands just for a single shot).
Accumulation of vast assets by drug barons in Pakistan has enabled them to continue large-scale operations even after crackdown and arrest of some of their leaders (although they have also managed to defy proper investigation getting themselves released). On a serious note, over the past four decades, drug barons in Pakistan have established themselves as patrons of politicians and government functionaries.
The ‘Norwegian Connection’ story exemplifies as to how narcopower flourished in the country and how drug barons managed to influence the highest authority in the State—read details in Pakistan: From Hash to Heroin. The “financial assistance” provided to some politicians by drug barons in the 1995, 1988, 1990 and all subsequent general elections are nothing but a continuation of the ‘drug legacy’ of the mid 1970s.
The drug scene at its roots in Pakistan, like other countries, is nothing more than a business story. This is a stark reality of the emergence of ‘dirty money power’ in the country. A 2018 study reveals that the share of Pakistani drug cartels in the total world drug trade was not less than US$2 billion a year. It has now reached the level of US$ 5 billion. A trade that started in the late 1970s has achieved this unbelievable proportion in five decades and so its political connections are understandable—those in power in Pakistan want to make quick bucks, irrespective of legality or illegality of their source.
The politics of drug trade has rendered millions of people, as a most helpless lot. This is a war against the people and humanity. Our present day civilization faces a great threat of annihilation if the rising tide of drug culture is not stemmed. Awareness alone can bring light to overcome the darkness caused by drug traders, merchants of death and destruction.
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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax.
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
Twitter: DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
Twitter: Adbul Rauf Shakoori
The recent publication, coauthored by these writes, is Pakistan Tackling FATF: Challenges & Solutions, available at: https://www.amazon.com/dp/B08RXH8W46 and https://aacp.com.pk/
