The news that the government was considering to include fiscal offences like serious tax crimes/tax evasion into the ambit of money laundering under the proposed Anti-Money Laundering Act (AMLA) would appear to be quite strange for the business community and other taxpayers. This surprising piece of information was disclosed by a senior official of the Financial Monitoring Unit (FMU) situated at the State Bank before the Senate Standing Committee on Finance where he said that present taxation offences were not considered as money laundering offences, and an enabling provision was proposed in the AMLA to include serious tax offences into the money laundering regime with a view to facilitate the law enforcement agencies to carry out their functions smoothly. The SBP representative added that the amendments proposed to the Anti Money Laundering Act, 2010 reflect government’s firm resolve to take expeditious measures to strengthen anti-money laundering regime and were aimed at streamlining the existing law in line with international standards prescribed by Financial Action Task Force (FATF). Governor, State Bank informed the Committee that SBP had issued guidelines to the banks regarding suspicious transaction reports and Currency Transaction Reports (CTRs) under the existing laws and the inspection teams were capturing banking transactions, which were suspicious but not reported by the banks. Supporting the government move, Finance Secretary asserted that some people were involved in tax evasion and later the same money was laundered and the government was tightening the regime to check money laundering and terror financing.
Strongly reacting to the proposed amendments, Senator Saleem Mandviwalla said that there was no justification to include tax evasion within the purview of money laundering as the FBR had its own comprehensive tax laws to deal with fiscal offences like tax evasion. It could be an international tax practice but the move to bring taxpayers within the purview of money laundering cannot be supported. Senators Kulsoom Parveen and Sardar Fateh Muhammad also opposed the government’s move to bring fiscal offences within the money laundering regime.
The proposal of the government to bring certain fiscal offences within the purview of AMLA speaks a lot about the typical attitude of the bureaucracy to accumulate more powers in order to harass ordinary citizens of the country including the taxpayers and scare the corporate sector into submission as well as its tendency to shift responsibility to other organs of the state. As stated by the Finance Secretary, it could be very true that some people indulging in tax evasion may also be involved in money laundering but clubbing together both the crimes would be tantamount to beat both types of offenders with the same stick. As is obvious, the nature of both the crimes is altogether different and, as such, different punishments should be meted out to the two parties violating the law. It could be argued that a stricter action under AMLA would coerce the tax offenders to fully comply with the tax laws, enabling the government to collect more taxes. But if, as admitted by the Finance Secretary, only some tax evaders were involved in money laundering, the net impact of the new provision of the AMLA could be minimal. As against this, the step could create a lot of resentment in the business community and retard investment, while providing the FBR staff with another weapon to intimidate the taxpayers and extract undue favours. Senator Saleem Mandviwalla, in our view, was absolutely spot-on when he observed that FBR had already comprehensive tax laws at its disposal to deal with fiscal offences. For instance, it could suspend the operations of bank accounts, impose heavy penalties and punish the evaders in various other ways in order to collect due taxes. It has also all the relevant data and identifies three millions potential taxpayers. One could only wonder why, like other countries, the FBR cannot maximise its efficiency and remove corruption from its ranks to expand the tax net and mobilise higher level of revenues, instead of getting more powers under the proposed AMLA. Also, why the FBR would like to abdicate or share its responsibility with other organisations of the state is another riddle. At present, the FMU situated at SBP is the central processing unit, which monitors banking transactions to check money laundering and terror financing. If there are certain weaknesses in the FMU or some procedural issues, these could be easily sorted out to increase its impact or enlarge the coverage to informal sector of the economy. Additionally, there are already apprehensions in some circles of the opposition parties that the proposed amendment to the AMLA could be misused against them. Given the present environment, materialisation of such a perception cannot be ruled out altogether. When all is said and done, nobody could possibly be against tightening the law against terror financing and awarding exemplary punishments to the offenders but the crime has a certain context and it should be treated as such.