Solar panel importers: Banks penalised for failing to check money laundering, over-invoicing

ISLAMABAD: The State Bank of Pakistan (SBP) has imposed penalties on certain banks for not checking massive money laundering and overinvoicing of Rs69.5 billion by solar panel importers.

Without disclosing names or amount of penalty, the SBP executive director, Wednesday, informed the Senate Standing Committee on Finance that the SBP has imposed monetary penalties on banks which did not raise “Red Flags Indicators” under the framework for managing risk for trade-based money laundering. The banks have approved the FI (declared invoice value for transfer).

The committee directed the SBP to give names of banks and details of other regulatory measures taken by the SBP to check such frauds by importers of solar panels.

The committee also directed the SBP to give a detailed briefing on the massive money laundering by solar panel importers. “We appreciate the Federal Board of Revenue (FBR)’s briefing on the subject, but the SBP must also update the committee,” the chairman of the committee said.

Senator Sadia Abbasi stated that the SBP should bring complete details of the case in the next meeting.

During the briefing to the committee, the FBR officials disclosed that five banks took huge cash deposits of Rs14 billion only in the case of M/s Bright Star Business Solution (Pvt) Ltd.

Senator Musadik Malik stated that the over-invoicing of billions of dollars has taken place and SBP must give a briefing on the action taken against the involved banks, as it is a case of “Hundi”.

Malik said that these 63 importers have imported Rs7 billion and the FBR has audited only 200 importers out of 450. A scam of Rs70 billion was unearthed.

The officials of the FBR informed that 6,232 goods declarations (GDs) filed by 63 importers were identified involving an amount of Rs69.5 billion worth of over-invoicing. The FBR has registered eight FIRs covering Rs40.94 billion (60 percent of total Rs69.5 billion) in 3,161 GDs.

The FBR has also found a Quetta-based cartel of three dummy companies and also arrested a proprietor of a company. The FBR has also found Peshawar-based cartels of two companies.

The FBR officials said that the banks were asked to provide details of currency transaction reports (CTRs) and suspicious transaction reports (STRs) in accordance with the regulations set forth by the SBP, however, the banks have sought time extension for replies while some have submitted incomplete information relating to the CTRs and STRs which raises serious concerns in respect of bank’s compliance with anti-money laundering regulations and their commitment to ensuring the security of financial transactions.

The FBR officials informed that banks failed to apply red flag indicators while dealing with fictitious solar panel clients/customers. In 2020-21, two importers transferred import remittances worth Rs20.4 billion out of Pakistan, while filing “Nil “income tax returns, which substantiates illegitimacy of the said funds.

Banks also ignored Financial Monitoring Units (FMU) instructions, as huge cash amounts were deposited in the bank accounts of the solar panel importers to obscure the origin of the said funds. In many instances, heavy amounts (Rs10 million or above) were deposited in the banks accounts as “cash transfers” in a single transaction.

Copyright Business Recorder, 2023