Bloomberg, a US based news agency, attributed Mossack Fonseca's cofounder Ramon Fonseca as stating that the leaked documents are "authentic" though "obtained illegally by hackers." In Pakistan's case it is relevant to note that Chief Justice Afzal Zullah ruled in 1992 that evidence even if illegally procured would be permissible (PLD 1992 SC 96)'; or, in other words, this ruling arguably provides a precedence to the apex court to even entertain illegally obtained evidence by the Joint Investigation Team (JIT) if deemed correct.
An important question is whether the government in general and the Ministry of Finance led by Ishaq Dar in particular passed laws post-hacking of Mossack Fonseca to ensure that existing loopholes enabling our influentials to use the financial services of offshore companies are plugged. During the proceedings of the Panama Papers case, the three-member bench established to implement the Supreme Court verdict considered two illegal activities that may have taken place notably money laundering and benami transactions. The relevant question for the Pakistani public is whether laws have been drafted and passed by parliament to mitigate against any past and/or future money laundering/benami account activity within the country and outside the country.
An Anti-Terrorism Act was passed in 2002, amended in 2004, which defined crimes of terror financing and money laundering while establishing jurisdictions and punishments. The law, passed by the Musharraf regime post-dated 9/11 and reflected global concerns over terror financing while also including pre-9/11 concerns with respect to money laundering by the drug mafia. Pakistan-specific National Accountability Ordinance (NAB) was passed in 1999 and was seen at the time and continues to be seen to this day as a tool in the hands of successive administrations to bring members of the opposition to heel.
Tax departments of several Western governments including the United States and several European countries angered at those nationals who held large offshore accounts to avoid paying their due taxes began negotiating terms with Switzerland for release of information of their accounts - a negotiation that was in more cases than not accompanied by threats (and in some instances levy) of heavy penalties and/or closing down the offending bank branches in their territories. Pakistan has no such bank branches though Dar did mention in the National Assembly that Pakistanis held in excess of 200 billion dollars in Swiss accounts.
Pakistan passed the Anti-Money Laundering (AML) ordinance in 2007 to combat financing terrorism and criminalized money laundering requiring the State Bank of Pakistan (SBP) to set up a Financial Monitoring Unit (FMU) to identify and draft a Suspicious Transactions Report which would then be passed on to relevant investigating agencies including: (i) Securities and Exchange Commission, (ii) NAB, (iii) Federal Investigation Agency, and (iv) Customs authorities. Or in other words any administration may be able to influence these state institutions to proceed or slow down the process of accountability.
In 2010, the Anti-Money Laundering Act replaced the AML and in December 26 2016 the Governor SBP, a Dar appointee, updated the AML/Combating Financing terrorism regulations of banks and development finance institutions (DFIs), adding a subsection titled Politically Exposed Persons (PEPs) which stipulated that where PEPs are concerned the banks/DFIs must: (i) implement appropriate internal policies, procedures and controls to determine if a customer or beneficial owner is a PEP; (ii) obtain approval from the bank's senior management to establish or continue business relations where the customer or a beneficial owner is a PEP or subsequently becomes a PEP; (iii) establish, by appropriate means, the sources of wealth or beneficial ownership of funds, as appropriate; including bank/DFI's own assessment to this effect; and (iv) conduct during the course of business relations, enhanced monitoring of business relations with the customer. In other words any administration controlling these entities could at any stage either begin or refuse to hold an inquiry or for that matter arrest it at any stage. Business Recorder checked with the investigating agencies as to how many cases are pending in this regard. NAB/FIA mentioned around 8 to ten cases and did not identify whether any belonged to PEP category while Customs have initiated 15 to 20 cases involving a sum of 30 million dollars though one would assume that the accused are exporters/importers and not PEPs.
Pakistan's AML/CFT law is retrospective or in other words the agencies can go back 10 years given that the law requires banks/DFIs to maintain necessary accounts for a minimum of ten years of an "unusual large transaction" from the date of completion of a transaction. This would again imply that the record of any transaction that took place say in 2006 may not be legally available to the court. In this instance it is relevant to note that the First Family has indicated that it purchased the Mayfair flats in 2006.
Additionally, the government criminalized avoidance or evasion of income tax, a measure resisted by the opposition members during deliberations in the Senate Standing Committee on Finance. Director General of Internal Revenue Federal Board of Revenue has received over 200 cases from FMU, 100 million dollar transactions and 6.2 billion rupees have been recovered from just one case however both Prime Minister Nawaz Sharif and Finance Minister Ishaq Dar have been gifted large sums money from their sons, and a gift is exempt from tax.
The benami accounts law was passed in September 2016 and would be applicable only on future transactions, with no case made under this act to date. The Act does not clarify as to the mode of investigation and/or penalty if say a benami flat is held outside the country. The 2017 Companies Act was passed in May this year which seeks to maintain a global register of beneficial ownership however the owner has to first reveal his ownership which common sense dictates is highly unlikely. To conclude, these laws can be implemented on a partisan basis and given that the decision to initiate proceedings rests with a small number of people their implementation would be relatively easy to control especially for the control freaks that we have had heading our ministries.
Copyright Business Recorder, 2017