Certified Anti Money Laundering Specialist:

Money Laundering in Pakistan:

Money laundering is on the rise in Pakistan. This crime has grown over the past three decades, fueled by the black money that wields political influence and power in the country, as well as the political and elite class. Unfortunately, during this period, no government has been able to effectively enforce laws aimed at curbing money laundering and its predecessor crimes such as drug trafficking, smuggling, and corruption.

What is Money Laundering?

Money laundering is the secret transfer of cash from one jurisdiction to another without informing government authorities for the purpose of evading taxes, concealing ill-gotten gains, or converting ill-gotten gains into legitimate assets. To move it back. Money laundering involves three steps:

• Depositing cash in a foreign bank,
• Conducting transactions as a layer of cash, and
• Investing the money withdrawn in legitimate investments.

Causes of Money Laundering:

Many factors lead to money laundering, which may exist within a country or state, or operate internationally.

• Tax Evasion:

Tax evasion refers to the concealment of personal or corporate financial assets. To avoid taxes, people hide their assets and income sources. Especially if they feel their taxes are not in their best interest, or if they are not concerned with the public interest. In addition Tax evaders can also manipulate tax forms by not reporting the correct amount of income from various sources. Fearing that authorities can trace hidden financial and non-financial assets and earnings, they send money to foreign banks or hide the identity and ownership of non-financial assets and property. Usually transferred to someone else without the family’s will or ability to manage the property independently.

• Financial Weakness

One of the main causes of money laundering is the weak and inadequate financial regulations and related authorities within the country. For example, if the tax office is not strong enough to question politicians, elites and ordinary people about their income and “financial and non-financial” assets, then it is possible for people to evade taxes and buy property. Money laundering is not difficult. Relatively more stable but foreign economies.

• Hush Money/ Bribery:

Bribery is Vulnerable because financial regulators and airport officials may be bribed by money launderers to avoid paying applicable taxes and not tracking the origin or destination of funds. Malicious practices are also related to financial regulation. This facilitates safe money laundering by airport authorities, which results in illegal money leaving the country.

• Corruption /Dishonesty:

Corruption is a highly unethical practice aimed at obtaining personal gain through force or bribery. For example, they may prefer to take bribes and transfer them to foreign banks or other investors. Hence, their corruption leads to money laundering by flowing cash into foreign banks or hiding financial assets and sources of income. In order to prevent this form of crime, we must prevent corruption.

Anti Money Laundering Act 2010:

(The Act) is the main law regulating the prevention of Anti Money Laundering and combating the financing of terrorism. In addition, said law as federal law applies throughout Pakistan.

According to Act, the Federal Board of Revenue is responsible for ensuring which designated non-financial business and profession (DNFBPs), including real estate agents, precious metals and stone dealers, and FBR supervised accountants, Anti Money Laundering. Moreover, it complies with And withholds financial assistance from terrorism obligations. And also Financial institutions, lawyers, legal entities, notaries, and non-FBR supervised accountants are under the supervision of other authorized authorities and self-regulatory bodies.

Stages of Money Laundering:

There are 3 stages of money laundering:

(1) Placement in Money Laundering:

Placement is the first step to keeping cash in a foreign bank. The placement phase of money laundering is achieved through scaling. Criminal groups often receive large sums of money with little visibility, making it difficult to trace the money. This move is called placement because the funds are kept in foreign banks without the attention of national authorities. By keeping money in accounts or other financial instruments, criminals hope to conceal their criminal activity and hide it from view.

(2) Layering Placement:

The second step involves financial transactions, cash withdrawals, wire transfers, etc., as well as hiding the original source of the money. This step is called layering because the money launderer makes multiple financial transactions that act like layers of cash. Online transactions, especially bank transfers, are the fastest layering method as they allow multiple cash transactions to be completed quickly. Moreover, this is where illicit money is mixed with legal money or is in constant movement from one account to another. Layering often involves creating many different transactions so that the cash can disappear and be laundered.

(3) Integration Stage of Money Laundering:

Intigration is the third stage that deals with the use of money for investments and other activities. This stage is called consolidation of funds because the laundered money is actually used. For authorities to track money laundering, unless the case or investigation was initiated while the funds were in Phase 1 or Phase 2. It is important for all businesses to ensure they are compliant with anti-money laundering (AML) regulations and to report illegal activity or behavior that suggests widespread illegal activity. Regulators recently imposed hefty fines on banks and financial institutions that failed to prevent money laundering.

Methods of money laundering:

There are also many methods used by human traffickers and money launderers to carry out money laundering crimes without drawing the attention of AML. In addition to trying to hide money through public deposits and businesses, money launderers also choose to avoid detection by:

• Building Money:

This procedure requires dividing large amounts of cash into hard-to-trace pieces. Each amount paid in small amounts is transferred to foreign banks through money orders, online transactions, cash deposits, etc. Tax-free money that can be moved legally can also be moved legally abroad. The technique of transferring a certain amount of money in small portions is also called “smurfing”. This usually involves the first stage of money laundering (placement of funds in a foreign bank via online money transfer, wire transfer, or wire transfer). In the order, or when traveling as a group but pretending to be individuals, each person has a different maximum amount to legally travel, but the amount varies.

• Smuggling:

Smuggling is the act of tricking airport and border officials into taking large sums of money out of the country. The money is then deposited in foreign banks, which may have lax or poorly enforced money laundering laws. This is believed to be the most common method of money laundering. And it can be said that it is a masterpiece that even the common people can understand.

• Trading:

Laundering through trade occurs when the invoice value is lower or higher, depending on cash inflows/outflows or expenses. Merchants often achieve this by providing fake invoices and accounts.

• Non Profitable Organization:

Establishing an N.G.O Non-Governmental Organization (N.G.O.), registering and funding it in another country does not use the funds for legitimate reasons for the N.G.O. local people. So it’s tax-exempt. If such he is an N.G.O. or trust organization operating in another country and illegally funded, it is definitely money laundering.

• Round Tripping:

At the same time, you sign a contract to buy some or all of the same assets at the same price. Round trips are used for money laundering and tax evasion. This is a technique by which one company sells its assets to another company. Buying and selling assets makes the latter liquid and facilitates quick cash exchanges and vice versa. Cash can be remitted abroad by being classified as “Foreign Direct Investment” (F.D.I.) and is exempt from taxation. For example, individuals and businesses may hire and pay foreign law firms or other organizations for their services. And please cancel the contract when the money (fee) is remitted.

• Bank Control Key:

This approach makes foreign or local banks with weak money laundering checks large shareholders. Therefore, a money launderer tries to launder money through a bank control key without investigation in order to gain influence over the bank and become a major customer of that bank by investing in the bank and acquiring shares. . This kind of money laundering is rarely detected because financial regulators treat the movement of currency from banks as regular cash.

• Cash-Based Businesses:

Some corporate organizations are involved in cash-based businesses. This means handling a lot of money and running multiple businesses. Gambling bars, casinos, clubs. Such companies typically do not disclose income from illicit sources or record where funds are sent. They present “dirty money” as clean money included in profits. This is part of money laundering. For example, a person enters a casino with a large amount of money earned through illegal means. He plays the game for a while and gives all the cash to the casino. This cash is represented as the amount of profits earned through casino gambling winnings. However, it has not been investigated whether the person who cashed in the casino was actually working for the casino or for a money launderer directly connected to the casino.

• Real State:

Money laundering through real estate Some criminals purchase real estate with ill-gotten cash, sell the property to obtain cash, and disguise it as legitimate money. Illicit money is considered money laundered because it is converted into legitimate income. This is done primarily to hide the exact amount spent on the purchase of the property and to avoid taxes.

• Foreign Currency Exchange:

Uncertified and unregulated foreign exchange companies are also present in various regions of many countries. These foreign exchange companies hold multiple currencies and usually transfer funds abroad at the request of local residents. Meanwhile, the government has never seen foreign exchange companies transfer funds abroad or collect cash that was sent to them in the form of remittances from people abroad. Thus, the government misses the opportunity to collect remittances, as well as tax revenues from cash sent abroad. As a result, this method of currency exchange or money transfer, which also includes hua or handi, is illegal in most countries. These companies also collect remittances and then deliver the respective remittances to the families of the senders without notifying the government authorities.

How Does Money Laundering Work?

Anti Money Laundering is the practice of making money from crimes such as arms smuggling under the guise of a legitimate business. Because such money obtained from crime is considered dirty. Similarly, the process most often occurs in three key stages: placement, layering, and integration. Each individual stage can become extremely complex due to the criminal activity associated with it.

Dealing with the problem of “Dirty or Forbidden earnings” in our financial system is a top priority of the government. Anti-money laundering (2nd Amendment) Act 2020, bringing it in line with international standards set by the Financial Action Task Force (FATF) and strengthening the Anti Money Laundering regime in Pakistan.

What is dirty money?

As such, money derived from certain crimes such as extortion, insider trading, drug trafficking, and illegal gambling is “dirty”. And it also try to clean to appear to have come from legitimate activities. In order to banks and other financial institutions don’t become suspicious.

Basic Offences:

The Company’s expert team can advise you on your existing anti-Anti Money Laundering systems and can assist you and your Company set up systems using the latest advice according to Under the Act. As well the expert can assure you that you can avoid fines and prosecutions for non-compliance.

As well as the expert team of Ahmed Ali Dewan & Co. often act on behalf of professionals who unexpectedly find themselves involved in investigations. Whether even then they are witnesses or suspects. In addition, the Company offers expert advice on what steps can be taken to minimize the impact of such an investigation.

Is Tax evasion apart?

Deliberate failure to pay Tax, which is an illegal act to allow a person or entity to avoid paying tax liabilities. Moreover, this also includes hiding or falsifying income without evidence of excessive deductions, failure to report cash transactions, etc. In addition, tax evasion is a serious offense punishable by criminal charges and significant sanctions.

Is Fraud apart?

Actually, the Fraud crimes generate money, which needs to become laundered so the criminals can use it without arousing suspicion. Hence we can say where there is a fraud, there is Anti Money Laundering. Moreover, many organizations have a department, that deals with the prevention of it.

Is Theft a part?:

It is probably the simplest and easiest crime, theft becomes Anti Money Laundering once it happens. Criminals then try to put the proceeds of crime into the economy without keeping people in mind, and as a result, they are less likely to fall, victim.

Is Bribery a part?

Bribery is a big part of Anti Money Laundering and it is a serious global problem because it has a significant impact on economic growth, political stability, and international crime.  In addition, Bribery can take place when it comes to politically exposed persons, also known as politically exposed persons. PEPs are a big threat when it comes to them because of their status in society. 

What is terrorist financing?

The fight against Anti Money Laundering and the financing of terrorism is constantly conducted by the IMF. Although it is the manipulation of assets obtained from criminal activities in order to disguise the connection between the funds and their illegal origin. Similarly, terrorist financing raises money to support terrorist activities.

What is compliance?

Anti Money Laundering is taken very seriously in Pakistan. Moreover, the consequences of not reporting suspected activities can become severe for both individuals and companies. If you need advice or representation in connection with any aspect of Pakistan’s money laundering law, please contact us now.

How we can help:

Ahmed Ali Dewan & Co. and its team specialize in advising both individuals and organizations involved in the fight against financial crime. Those who have been caught in major fraud and Anti Money Laundering cases and found to become involved in a false accusation. For example, those involved in money laundering at a “high level” through terrorist activities and international corruption. People who are suspected of further facilitating the process for the same. Payments, whether electronic or cash, are used for corrupt, financial, or physical assets. Whether the parties are intentionally or unintentionally involved, we can help.

We also give regularly advises those who might become considered facilitators. In which lawyers, trust and Company agents, investment banks and fund managers, accountants, and real estate agents on the regulatory and criminal implications of Anti Money Laundering investigations, whether suspects or witnesses.