What do offenders do with their money? Once profit has been earned from illegal businesses like corruption, tax evasion, smuggling, and drug trafficking, where do those proceeds of crime go? Invariably that money is laundered — a complex process undertaken to hide the original source of funds. There is an inextricable nexus between money laundering and globalization. Money laundering has thrived over the last three decades in this global village. The complication in money laundering is it is difficult to trace; by apparently appearing legitimate it becomes harder to track the criminal activity that generated the proceeds in the black economy. The criminals break up large amounts of cash into less conspicuous smaller sums as a way of avoiding suspicion. Nonetheless, researchers and scholars have been unable to estimate the exact estimate of money being laundered owing to the furtiveness associated with each of the money laundering methods, but it is estimated that globally USD 1.6 trillion is laundered every year. This figure is equivalent to the annual GDP of most of developed countries like South Korea.
Regrettably, money laundering has gained a lot of momentum in Pakistan. Criminals park funds in the system whereby the money undergoes a series of conversions to distance it from its source. Ultimately, the money re-enters the legitimate economy through investments in luxury ventures, real estate, or business enterprises. In addition, hundi market in tandem with the dollar crisis has been in news in the recent past. Through the hundi method, overseas nationals flourish black economy and surreptitiously send remittances to their relatives, friends, family, etc. This entire transaction is taking place without touching Pakistan’s soil or any of its legitimate systems. Reports revealed that Khanani and Kalia (K&K) held between 25 to 30 percent of the hawala market at that time and were found guilty of illegally transferring billions of dollars out of Pakistan leading up to their arrest. Press reports speculated that these transfers depleted Pakistan’s foreign exchange reserves, forcing the country to seek an IMF bailout package. In much a similar way, Pakistani model Ayyan Ali was arrested at Islamabad Airport when U.S.$506,000 were found in her bag. This amount is far higher than the maximum cash limit allowed to be taken abroad, which is recently set at $5,000 for each visit and $30,000 a year. Similarly, the alleged money laundering case of Khidmat-e-Khalq Foundation highlights the sad story of money being laundered by NGOs under the false pretext of social welfare.
The APG improved Pakistan’s rating after the latter took some bold steps to address shortcomings in relation to designated non-financial businesses and professions (DNFBP) which include realtors, precious stone dealers, lawyers, notaries, other independent legal professionals, and accountants. The FATF rightly identified these “non-financial” businesses as being susceptible to money laundering and terrorist financing due to the nature of their business and the transactions they conduct. Certainly, despite some strides, these DNFBPs still remain undocumented, which raise concerns as these businesses can be used for terrorism financing and money laundering.
The main issue nowadays is crypto laundering. Cryptocurrency is increasingly becoming the preferred currency of cybercriminals as it is easier for fraudsters to obscure the source of criminal proceeds. They mostly request funds in a specific digital token or transfer their fiat currency into crypto and store these virtual currencies in a crypto wallet or transfer them into other assets. It offers a blend of anonymity, ease of use, and the potential to evade international regulations and borders. There is a strong need for policymaking in the crypto regime and subject the cryptocurrency firms to rules to prevent the abuse of digital coins. This will enable the government and the emerging FinTech sector to stay one step ahead of criminals. It is also notable to mention here that curbing money laundering will also create demise in other criminal activities viz. human and drug trafficking, goods smuggling, financing of terrorism, etc. because all these crimes are financed by money laundering activities.
FIA has recently established 08 new circles to curb money laundering. The SOP 07/2022 of FIA obligates Investigation Officers to check elements of money laundering in every FIR and enquiry and recommend parallel proceedings in respective Anti Money Laundering Circles across the country. However, it is appalling to note that the success rate of seizing and repatriating laundered money is abysmally low. The way the United States, the United Kingdom, and even India can negotiate mutual legal assistance with other countries due to economic or geopolitical reasons is different in the case of Pakistan. Therefore, global cooperation is unavailable as expected in many cases.
It is obvious that the documentation of the economy can only pave the way for a transparent economy. There is a dire need to step up their efforts and formulate investigative teams that comprise officers from LEAs, businessmen, product specialists, fraud and cyber experts, financial analysts, and data scientists. Admittedly, the days are gone when investigators were individuals. The key to successful prosecution now lies in technology-aided investigations, led by a team of subject specialists, that produce more relevant and comprehensive results.