Money Matters

Chasing dirty money

Money Matters
By Zeeshan Haider
Mon, 02, 18

World over, crackdown on dirty money is intensifying each passing day.



It is not just the United States and its European allies which have stepped up their war on black money and are tightening their laws to stop the unbridled spread of this money into their economies, but they are also putting pressure on nations across the world, including their Gulf friends, to heavily scrutinise their exchequers for such money.

The United Arab Emirates has been regarded as one of the choicest destinations for keeping such money, but in recent years it has introduced strict laws to discourage flow of black money into the country.

Under the new laws, the Emirati banks have been authorised to quiz non-resident account holders about their tax details in their countries of origin as well as source of the money deposited in the accounts held with them.

For long, there has been talk that influential Pakistani leaders have also accumulated such money which was believed to have either been stashed into foreign bank accounts or was used to purchase expensive properties abroad.

Pakistanis could still easily recall reports about London’s Surrey Palace and Swiss bank accounts allegedly owned by Asif Ali Zardari which dominated national politics and media in the 1990s.

But recent revelations about the offshore wealth accumulated by influential Pakistanis have baffled every one.

This wealth might not have been totally raised through illegal means and could have been stashed outside to avoid taxes at home, but lack of information on the source of this money with Pakistani authorities raises many questions about the legality of this wealth.

According to Finance Minister-on-leave Ishaq Dar, around 200 billion dollars owned by Pakistanis are lying in the Swiss banks alone.

In recent years, Pakistanis ranked among the top investors in UAE property business. Interestingly, Pakistanis have left behind nationals from the first world countries, like the United States and Europe, in making investments in Dubai property business.

After UAE’s own nationals and Indians, Pakistanis ranked third among those investing in the real estate sector of the Gulf nation. According to some estimates, Pakistanis own properties worth 900 billion rupees in Dubai alone.

Ironically, the Federal Board of Revenue (FBR) as well as Federal Investigation Agency, which are responsible for checking money laundering from the country, claimed that they don’t have any knowledge of such Pakistanis.

In a meeting of the National Assembly Standing Committee on Finance last week, the Pakistan Tehreek-e-Insaf (PTI) lawmaker Asad Omar said the FBR is in possession of the lists of Pakistanis who own properties in the Gulf.

It is not just Gulf where Pakistanis have heavily invested their money. They have spread their investments all over the world and it is suspected that a big chunk of this money is raised through illegal means.

The disclosure of names of 400 Pakistanis in Panama Papers is just the tip of the iceberg. Many more names were revealed in Bahamas Leak as well as Paradise Papers.

For political reasons, the cases related to Sharif family were actively pursued which ultimately led to the dismissal of Nawaz Sharif as the prime minister.

Sharif’s detractors justify active persuasion of the cases relating to the ruling family by saying that it would embolden the authorities to take action against other influential people, however, so far no serious steps have been taken to pursue other cases.

It is not just the political elite of the country which keeps offshore wealth and properties. It has now become an open secret that the entire ruling elite, including retired military officers, judges, big businessmen and bureaucrats have made investments in safe havens all over the world.

It should now be understood by this wealthy class of Pakistanis that keeping offshore money and property without any scrutiny is becoming increasingly difficult.

The United Kingdom recently enforced a law “Unexplained Wealth Orders” whereby those suspected of buying property with dirty money would be forced to explain the source of their wealth or else see seizure of that wealth by the authorities.

Anti-corruption campaigners have welcomed the law as they say London is at the centre of a global web of embezzled money.

The UK-based Transparency International has identified five properties which it says British authorities should immediately begin investigating under the new law.

Interestingly, these five properties include Avenfield flats owned by the Sharif family. As international community has intensified its efforts to check spread of black money, the Pakistani authorities have also swung into action and officials say they have contacted UAE as well as Swiss governments to obtain details about the wealth and properties Pakistanis hold in those countries so they are brought under the tax net at home.

The government is also working on an amnesty scheme under which these Pakistanis are being encouraged to bring their money and property back to the country. This amnesty scheme would legalise their possessions by letting them pay a certain amount of tax. Authorities say the government plans to introduce this amnesty before the end of its term.

Successive governments have launched such amnesty schemes in the past, but they met with failure. It would be interesting to see how the upcoming amnesty scheme would be different from the previous ones, and if it could persuade people to bring their money back to Pakistan.

Authorities are basing their optimism about the upcoming scheme on the tightening noose around unexplained money around the world. They believe that the global action against unexplained wealth could force the people to bring their money back to Pakistan.

They refer to the experience of Southeast Asian countries like Malaysia and Indonesia which have raised billions of dollars in taxes by launching amnesty schemes.

However, Pakistan has had no encouraging results from such schemes in the past. Moreover, despite widening crackdown on dirty money across the globe, still there are a lot of safe havens available for such money to be parked and many people would still try to avail these options.

The Pakistani authorities need to devise a well thought-out strategy to deal with this issue effectively. They should not repeat the past experiences that would be nothing but waste of money and resources.

With just a few months left for the government to complete its term, it is advised to avoid taking any step in a hurry and it is better to leave it for the new government formed after general elections to take steps which have long-term effect.

The writer is a senior journalist based in Islamabad