If you ask, is there a legal way to launder money out of Pakistan? I will say yes, That will be under the umbrella of the economic reforms act of 1992.
Chairman FBR, Mr. Shabbar Zaidi, recently admitted the state’s inability to retrieve the money laundered out of Pakistan, the first official admission regarding the illusion of bringing back the looted money.
He further said that 80% of the money got transferred legally, and 15 to 20% went via illegal ways.
You probably have no clue of a legal channel to transfer money out of Pakistan without any hassle. It’s called the Protection of Economic Reforms Act of 1992.
Protection Of Economic Reforms Act
Here is the summary of the Act,
1. All citizens of Pakistan are free to bring, hold, sell, trade, and take out foreign exchange within or out of Pakistan in any form.
However, there are few exceptions related to the exports, borrowing, services, and in case of purchase of foreign exchange in the local markets, etc. where the said Act is not applicable.
2. Section 5 of the Act grants immunity to the foreign currency accounts opened before December 1999, from any tax inquiry, tax payments, and to declare the source of investment.
3. The income derived from such accounts was also exempt from tax until December 1999.
4. The banks will maintain complete secrecy regarding the transactions in the foreign currency.
5. State bank or any other bank will not impose any regulations on deposits and withdrawals from the foreign currency account.
Amendment In The Reforms Act
After 26 years of its enactment, the government finally made some changes through finance act 2018. Some of the changes are as under:
1. The amount of carrying foreign exchange is limited to 10,000 USD, while the government may ask the source of the investment if required.
2. The bank secrecy is now subject to the Foreign Exchange Regulations Act of 1947 and the Income Tax Ordinance of 2001.
3. The cash deposit into the existing foreign accounts requires the holder to be a tax filer.
The protection of the economic reforms act that was to protect the foreign investment in Pakistan, but elite class misused or more correctly abused this ordinance to transfer funds out of Pakistan.
PML(N) was in power, and Mian Nawaz Shareef was prime minister at the time when this act was introduced.
This ordinance opened the door of capital flight and set up the base for the Aven Field apartments, Surrey Palace, and offshore accounts and properties. Before that, there was no trend of money laundering in Pakistan.
And not to mention, the wealthy across the board took advantage of the act. For example, PTI leader Jahangir Tareen accepted transferring 5 million USD under the said ordinance to his son in the UK.
According to the chairman FBR, Pakistanis sent out 6 billion USD every year for the last 20 years. It aggregates to 120 Billion USD, an amount so close to our total external debt.
The Capital Flight Continues
Mr. Zaidi also stated that people are still laundering money out of Pakistan. Pair it with the state’s inability to bring the money back, it portrays a gloomy picture of Pakistan’s economy.
And even though PM Khan vows to hang all the corrupt, the capital flight continues.
Stop Chasing The Illusion
We expect Khan to accept reality, leave whatever is gone, and better focus on to stop further capital bleeding.
I don’t mean to abandon the efforts to control corruption. Let the NAB handle it, and whenever they have a tip-off, instruct them to make a plea bargain and move to the next case.
Don’t take the legal route as the slow judicial process will eat up your precious time.
Dear Khan, stop chasing the illusions and bring your real potential to work for the betterment of your country.
What’s your opinion about the said act? Do you have an idea to retrieve the looted money?