Pakistan Customs Gets Teeth to Fight Money Laundering in Trade

Pakistan Customs Gets Teeth to Fight Money Laundering in Trade

Karachi, July 5, 2024 – Pakistan is taking a significant step towards combating money laundering in foreign trade with the establishment of a new directorate within the Pakistan Customs department.

This initiative, empowered by a recent amendment to the Customs Act, 1969 through the Finance Act, 2024, aims to strengthen Pakistan’s defenses against illegal financial activities.

The newly formed Directorate General of Combating Trade Based Money Laundering (TBML) will be led by a Director General and staffed with dedicated professionals, including Directors, Additional Directors, and support personnel. Their primary focus will be on scrutinizing financial transactions related to import and export activities.

This move comes after years of Pakistan’s ongoing efforts to curb money laundering through import payments and prevent the illegal outflow of foreign currency. The recent inclusion of exporters under the normal tax regime in the Finance Act, 2024, signifies a major step in this direction. This policy compels exporters to provide a complete record of their transactions to the tax authorities, enhancing transparency and accountability.

The urgency for such measures is underscored by a 2019 framework issued by the State Bank of Pakistan (SBP) on combating money laundering through foreign trade. The framework highlights the growing vulnerability of international trade to money laundering and terrorist financing activities. Criminals exploit legitimate trade transactions to disguise illicit transfers by employing methods like under-invoicing, over-invoicing, manipulating shipment quantities, and obscuring the true nature of goods or services involved.

The establishment of the TBML Directorate signifies Pakistan’s commitment to establishing a robust regulatory framework to mitigate these risks. This specialized unit will be equipped to identify and investigate suspicious financial activities within trade transactions.

The success of this initiative hinges on effective collaboration between the TBML Directorate, the Federal Board of Revenue (FBR), and other relevant authorities, including the State Bank of Pakistan and law enforcement agencies. Enhanced information sharing and coordinated efforts will be crucial in deterring and disrupting money laundering attempts through foreign trade channels.

This development is a positive step for Pakistan’s financial system and its integration with the global economy. By tackling money laundering, Pakistan fosters a more transparent and secure trade environment, attracting legitimate businesses and investors while safeguarding national security interests.