“Money Laundering & AML Procedures in Pakistan”

Abstract

Money Laundering is the process by which criminals attempt to conceal or disguise the true origin and ownership of the proceeds derived from criminal procedures. It is not a new concept rather it is an old and global one but its true realization and assessment followed by counter measures to curtail the phenomena is rather a modern concept. According to FATF (1997-98) Annual Report the annual money laundering estimates range from $ 100 bn-$500 bn. It is the art with which money launderers use the tools of placement, layering and integration in order to deceive the regulatory bodies and put a veil of legitimacy over their illegally earned wealth. Banks and other financial institutions are known to be the pioneers in developing a framework to counter money laundering but the process gained considerable importance after the 9/11 incident and a serious effort was launched to develop a fool proof counter mechanism or for that matter constructing a filtration plant through which every customer and his/her transaction has to pass through. The filtration plant leads to a tracking system whereby any proceed is tracked right from the start to its logical end. The phenomena of money laundering was earlier pegged with the proceeds generated by embezzlement, ransom, bribery, smuggling, illegal use of banking channels and other criminal activities that had a negative impact over the image, society and economy of a country but today money laundering is considered extremely deadly as the proceeds generated from the process are channeled to finance terrorism and extremism which has, is and will always disturb the peace of this beautiful land of ours. The igniter of corruption, money laundering and terrorism is nothing else but the deprivation, starvation and poverty created by the unjustified distribution of wealth and economic benefits. In this regard the international community comprising of many countries and international financial institutions have joined hands to jointly fight against this serious crime, cut its root causes and promote peace and harmony on earth. The developed countries using their strengths like policy framework, economic strength, compatible infrastructure, rule of law and high literacy rate etc has done a lot to counter the phenomena but it is the developing countries whose weak economic conditions, law and law enforcement agencies, porous borders, incompatible policy and infrastructure frame work, low literacy rate etc are adding fuel to fire because they are badly hurt by money laundering. First of all they are already running fragile economies which are adversely affected by productivity leakages and now their problems has become manifold since the money laundering phenomena has taken the shape of a source to finance terrorism for destroying peace. In Pakistan the beautiful land of ours the campaign against money laundering did not get momentum up till the 9/11 event but since then the regulatory authorities have put in a lot to develop a sound policy frame work and also most importantly has ensured its implementation and enforcement. The principal sources of money laundering in Pakistan are corruption, narcotics and drug trafficking, smuggling, hawala/hundi and tax evasion. It has taken a shape of an organized crime whereby a top-down channel of corruption can be visualized. In extreme cases former Prime Minister’s of Pakistan have been convicted by international courts for using either directly/indirectly money laundering channels so as to put a legitimacy veil over their illegally earned wealth. This study looks at the issue and its counter measures both at the national and the international level. In the end a list of recommendations has been prepared keeping in view our strengths, weaknesses, opportunities, threats and limits to effectively control the issue and seal leakages to promote economic and social well being of the citizens and in turn of Pakistan.