Dr. Ikramul Haq
June 26 is being observed as International Day against drug abuse and illicit trafficking as decided by the United Nations General Assembly in 1987 to raise the level of awareness in the international community about the dangers of drug abuse, to prevent its spread and to encourage all efforts to combat the menace at international level.
The successive governments in Pakistan provided money laundering schemes to the black economy, including proceeds from heinous drug trade in the name of “good economic measures” (sic) to “boost industrial progress”. Our drug barons hardly need any channels for money laundering because support from the State is available. If anybody brings money (earned from drug trade) in Pakistan through normal banking channels or otherwise, the tax authorities cannot pose any question about the ‘source’. In other parts of the world, the governments through asset-seizure legislation confiscate such dirty money and punish the offenders. Our rulers, allegedly beneficiaries of such money, legalize them. Criminals remit millions of rupees every year and that enjoy complete immunity under the Protection of Economic Reforms Act of 1992 from probe by law enforcement agencies.
In the Income Tax Ordinance 2001, promulgated on 13 September 2001, a special provision [section 111(4)] was inserted facilitating the money launderers to remit (laundered is more appropriate term) their ill-gotten money through banking channels and surrender the foreign currency to the State Bank and get Pakistani rupees as encashment. In this way they can escape not only taxation but any probe into sources. This scheme aimed at bringing foreign funds to Pakistani economy succeeded immensely as foreign remittances crossed the US$ 13 billion mark in 2012. This provision is being abused by the Pakistani drug syndicates and tax dodgers to launder their money through State patronage.
In the past, many schemes like Bearer National Fund Bonds, Foreign Exchange Bearer Bonds, Special Bearer Bonds, US Dollar Bonds and Certificates etc also helped the drug baron to decriminalize their dirty money. Since the General Zia era, Pakistani black economy has flourished at an amazing rate. According to various studies, the parallel economy is growing at an alarming rate of 23 per cent per annum. It is estimated that every fifth rupee transacted in Pakistan is black.
A study by State Bank of Pakistantitled ‘The Size of Informal Economy in Pakistan’estimates that total size of informal economy is around 30% of total economy. It means that annually some 800-900 billion rupees are generated in Pakistan by the parallel (untaxed) economy (informal, though not illegal). Black money, generated through organised criminal activities e.g. kidnapping for ransom, rent-seeking, smuggling in goods and narcotics trade etc. is about Rs. 1300 billion that does not appear in the study of SBP but documented in Pakistan: Enigma of Taxation. Another study—Pakistan: Drug-trap to Debt-trap—estimates the total figure of informal economy at US$ 95 billion.
Pakistan is one the worst hit countries by terrorism and money laundering. There is sufficient evidence that militant groups working against the security and stability of the State generate huge funds through organised criminal activities and also get huge “donations” from “sympathizers” in and outside Pakistan. It is an irrefutable fact that certain laws protect illegal money, for example section 5 and 9 of Protection of Economic Reforms Act, 1992 and section 111(4) of the Income Tax Ordinance, 2001. These laws ensure unlimited flow of remittances and dealings in foreign currencies.
In the presence of so-called “protective” (sic) economic laws cited above, the provisions of Anti-Money Laundering Act of 2010 have rarely been invoked. In fact, this has become a dormant law. The banks are not reporting any suspicious transactions under section 7 of Anti-Money Laundering Act, 2010 or section 67 of Control of Narcotics Substance Act of 1997. This shows the slackness of institutions and agencies responsible for implementing these laws.
Our terrorist networks are well-connected with international drug syndicates and private banks provide them every facility to launder drug money. In these operations the western and American banks are equally involved as revealed by the former private banker, Antonio Geraldi, in a testimony before the US Senate Sub-committee, projecting significant growth in the US bank laundering. “The forecasters also predict the amounts laundered in trillions of dollars and growing disproportionately to legitimate funds.”
John Reed, Chairman and co-CEO of Citigroup in his testimony before the Senate said: “I am John Reed, Chairman and Co-Chief Executive Officer of Citigroup. I appear today with Todd Thomson, who became the head of our Private Bank about ten days ago, and Mark Musi, the head of the Private Bank’s Compliance and Control Department. Unfortunately, Shaukat Aziz, who ran the Private Bank for the last two years and under whose leadership many of the improvements in our Private Bank’s anti-money laundering programs took place, cannot participate in these hearings. Mr. Aziz would really have been the most appropriate witness today, given his experience and knowledge but as you know, he was called home to serve his country, Pakistan, as Minister of Finance. He left the Bank on October 29. He asked me to submit his statement for the record, and it is attached to my own all financial institutions…….. whether banks, securities firms, or other types of financial intermediaries are potentially vulnerable to money laundering. Private banks are just one subset of the potentially vulnerable institutions. Our Private Bank, for example, is a very small part of Citigroup, accounting for about 2.5% of Citigroup’s business. Private banks in general are no more and no less vulnerable to abuse by the unscrupulous and the dishonest than the much larger parts of most financial institutions”. This statement shows the expertise of our former prime minister (also holding portfolio of finance minister) in “anti-money laundering” areas, none of which was introduced in Pakistan during his tenure. On the contrary, laws promoting money laundering were passed.
Today, all the big US banks have established multiple correspondent relationships throughout the world so they may engage in international financial transactions for themselves and their clients in places where they do have a physical presence. Many of the largest US and European banks located in the financial centres of the world serve as correspondents for thousands of other banks. Most of the offshore banks are laundering billions of black money. All the big banks specializing in international fund transfer are called money centre banks, some of the biggest process up to $1 trillion in wire transfers a day. The most recent estimates (2012) are that 60 offshore jurisdictions around the world licensed about 4,000 offshore banks that control approximately $35 trillion in assets.
This is the situation on ground whereas we daily hear in media big claims about WAR GAINST DRUGS & TERROR. This is all eyewash. In reality all the financial institutions and State structures are subservient to these billionaires, the ruthless drug barons, who know how to move money from one part of the world to another, buy government functionaries, control the politicians, use law enforcement officials and terrorists and get the profits they want from the drug trade—a deal of death for many innocent people around the world.
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The writer (ikram@huzaimaikram.com) specialises in studying global heroin economy. He is author of internationally acclaimed books, Pakistan: From Hash to Heroin and its sequel Pakistan: From Drug-trap to Debt-trap.