Fake firms exposed in Rs3.26bn router imports

KARACHI: A customs investigation has uncovered the alleged use of fake companies to import 71,815 internet routers worth Rs3.26 billion without approval from the Pakistan Telecommunication Authority (PTA).

According to an investigation report prepared by Customs authorities in Karachi, two companies allegedly imported the routers while committing under-invoicing and suspected trade-based money laundering. The companies identified in the report are Muslim Sons Enterprise and Mosani Syndicate.

The report described both firms as allegedly fake or paper companies. They were reportedly registered in the names of frontmen and allegedly used as “market IDs” for hidden operators involved in the import business.

The registered business addresses of the two companies also raised serious questions. Investigators found that one address was being used by a flour and rice shop, while the other was a rented residential property.

The investigation further found unusual activity in the companies’ WeBOC accounts. Muslim Sons Enterprise and Mosani Syndicate were reportedly accessed through 2,983 and 2,732 unique IP addresses respectively. As many as 1,048 IP addresses were common to both companies, strengthening suspicions that the two firms were operating under common control.

According to the report, the companies carried out imports exceeding Rs2.2 billion. After the addition of duties and taxes, the total value of the transactions crossed Rs3.2 billion. However, the combined initial capital of their owners was reportedly only Rs2.2 million.

Investigators raised concerns over the huge gap between the companies’ financial capacity and the scale of their imports. The report suggested that the transactions may have been financed by undisclosed beneficial owners.

The investigation also found significant overlap between the companies’ business networks. Both firms reportedly shared 108 local buyers and 12 foreign suppliers.

The report highlighted possible tax irregularities as well. Despite local sales estimated at around Rs2.9 billion, the companies allegedly paid almost no sales tax in cash transactions. Investigators also detected substantial under-invoicing in the imports.

The declared import value of the routers was reportedly only Rs97 million. However, during customs assessment, their value was increased to around Rs565 million. The assessment process reportedly resulted in an increase of approximately Rs1.3 billion in the declared import values across the transactions.

Investigators said the case appeared to go beyond the unauthorised import of routers. The report pointed to suspected financial fraud and possible trade-based money laundering, including the possibility that import payments were transferred abroad through the bank accounts of front companies.

Customs authorities have sought details from relevant banks regarding the sources of funds and payment trails to determine the actual beneficiaries and movement of the money.

The report also alleged that customs officials faced pressure and threats after they refused to clear the consignments without investigating the beneficial ownership of the companies.

What initially began as an investigation into the suspicious import of more than 71,000 routers has now expanded into a wider probe involving alleged fake companies, hidden operators, suspicious financial transactions and billions of rupees in trade flows.

The customs investigation has recommended the formation of a joint investigation team comprising officials from Customs, Inland Revenue and the Federal Investigation Agency (FIA).

It also recommended suspending or cancelling the WeBOC user IDs associated with the two companies and referring their tax-related matters to Regional Tax Office-II Karachi for further investigation.