Lahore High Court holds that FBR can investigate alleged money laundering independently of pending income tax proceedings.
LAHORE, September 27, 2026: The Lahore High Court (LHC) has held that the Federal Board of Revenue (FBR) can register and investigate alleged money laundering cases independently of pending income tax proceedings, treating money laundering as a separate offence under Pakistan’s anti-money-laundering framework.
The ruling was delivered by a two-member bench comprising Justice Khalid Ishaq and Justice Hassan Nawaz Makhdoom in Writ Petition No. 2928 of 2026 and connected cases. The petitions challenged the powers and actions of the FBR’s Directorate General of Intelligence & Investigation, Inland Revenue (I&I-IR), and were dismissed.
The development is significant for the distinction it draws between ordinary tax proceedings and criminal investigations under the Anti-Money Laundering Act, 2010.
Money laundering treated as a separate offence
According to the judgment, the FBR’s I&I-IR does not have to wait for an income tax dispute to reach a final conclusion before initiating action under the anti-money-laundering law.
The existence of a pending tax assessment, audit, recovery proceeding or other tax dispute does not, by itself, prevent authorities from investigating whether funds have been acquired, transferred or dealt with in circumstances that may constitute money laundering.
The ruling therefore distinguishes the determination of a taxpayer’s income tax liability from an investigation into the alleged laundering of proceeds.
FBR I&I-IR powers upheld
The LHC recognised the authority of the FBR’s Intelligence & Investigation, Inland Revenue wing to register FIRs, conduct investigations and pursue prosecutions under the applicable anti-money-laundering framework, subject to the requirements of law and due process.
The judgment also distinguishes an alleged money-laundering offence from the underlying offence that may have generated the proceeds.
Accordingly, the court’s reasoning means that an anti-money-laundering case is not necessarily dependent on a prior conviction for the predicate offence from which the allegedly illicit proceeds originated.
The FBR itself identifies Intelligence & Investigation, Inland Revenue as having a role in proceedings under the anti-money-laundering framework. Its published case-law material also records an earlier LHC judgment concerning the powers of I&I-IR under Anti-Money Laundering SRO 425(I)/2016.
Tax and money-laundering proceedings can proceed separately
A central aspect of the ruling is the court’s treatment of tax and money-laundering proceedings as separate legal processes.
The existence of an ongoing income tax assessment or dispute does not automatically require an anti-money-laundering investigation to remain suspended until the tax matter has been finally determined.
The distinction is particularly relevant because the Supreme Court’s 2024 ruling in Directorate of Intelligence & Investigation-FBR v. Taj International (Pvt.) Ltd. concerned criminal proceedings under the Sales Tax Act, 1990 and the requirement for determination of sales tax liability before prosecution in the circumstances before that court.
The LHC’s present ruling, as described in the case before it, treats the separate anti-money-laundering regime differently.
Taj International judgment distinguished
The petitioners had relied on the Supreme Court’s judgment in the Taj International litigation.
The Supreme Court decided the consolidated Taj International matters on December 4, 2024. The case concerned criminal proceedings under the Sales Tax Act, including whether FIRs and other criminal steps could precede determination of sales tax liability under Section 11 of that law. The Supreme Court declined to interfere with the relevant High Court judgments.
The Supreme Court’s reasoning was specifically linked to the structure of the Sales Tax Act, including the relationship between tax assessment, the amount of tax involved and criminal penalties.
The LHC has now distinguished that authority in the context of money-laundering proceedings, indicating that the Taj International ruling cannot automatically be applied to prevent action under a separate anti-money-laundering statute.
Suspicious transactions and FMU reporting
The judgment also addresses the role of suspicious transaction reports.
Where banks identify suspicious transactions and report them to the Financial Monitoring Unit (FMU), subsequent action by the relevant authorities can take place within the statutory framework and subject to applicable safeguards.
Questions concerning the origin of funds, their movement and the circumstances surrounding allegedly suspicious transactions can therefore be examined through the relevant criminal justice process.
High Court writ jurisdiction
The court also considered attempts to use constitutional writ jurisdiction to halt criminal proceedings at an early stage.
In substance, the ruling indicates that a constitutional petition would not ordinarily be used to prematurely terminate a criminal investigation where the relevant authorities are acting within their lawful jurisdiction.
Issues requiring examination of evidence, including the source and movement of funds, can be considered by the Special Courts having jurisdiction over the proceedings.
This approach leaves questions of evidence and the merits of an alleged offence to the appropriate criminal proceedings rather than determining them prematurely through writ jurisdiction.
FBR welcomes ruling
The FBR welcomed the Lahore High Court’s decision, describing it as providing greater legal clarity concerning its role in combating money laundering and financial crime.
The case was pursued under the guidance of Aqeel Ahmed Siddiqui, Director General (I&I-IR).
The ruling does not mean that every tax dispute constitutes money laundering. Rather, it concerns the legal ability of the relevant authorities to pursue an anti-money-laundering investigation independently where the statutory requirements for such action are alleged to exist.
The decision therefore reinforces a legal distinction between ordinary tax assessment proceedings and the separate criminal framework governing alleged money laundering in Pakistan.