All forex accounts exempt from scrutiny, Senate panel told

Economic Reforms Protection Act provides immunity to funds transferred to and from Pakistan

Shahbaz Rana April 28, 2016
PHOTO: REUTERS

ISLAMABAD: A law enacted in 1992 excluded all money transferred from abroad or brought into Pakistan via foreign currency accounts from scrutiny, a senior officer of the State Bank of Pakistan told members of a Senate panel on Wednesday.

Briefing the Senate’s Standing Committee on Finance on Wednesday, SBP Director Irfan Ali said the Economic Reforms Protection Act of 1992 provides blanket immunity to funds transferred via foreign currency accounts to and from Pakistan. According to him, money can even be transferred without the permission of the central bank.

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Analysts said the proposed judicial commission, likely to be set up to investigate offshore funds and companies owned by Pakistanis, might never be able to unearth the truth.

An independent lawyer, Mehmood Mandviwalla, also seconded the central bank’s point of view. He said the act superseded all laws of the land. Interestingly, PML-N introduced this law during its first tenure.

In his presentation to the standing committee, Mandviwalla said that the Economic Reforms Protection Act would impede the Judicial Commission’s work. He said the 1992 law also allowed complete secrecy to holders of foreign currency accounts. He said that the law barred authorities from asking anyone about money transferred via foreign currency accounts till 1999. In 1999, Mandviwalla said, the law was amended, providing room for asking some questions, but this had not yet been tested in courts.

Discussions also showed that the central bank was implementing self-contradictory foreign exchange regulation regime.

The director said that the central bank exercised “appropriate controls over transfer of funds”. He said if a person or company “is transferring up to $5 million funds abroad, the permission of the central bank is required”. But if the transferred amount exceeded $5 million, the approval of the Economic Coordination Committee of the Cabinet is required, said Irfan Ali.

Ali said that under the Economic Reforms Act, anyone with a foreign currency account could transfer money abroad via normal banking channels without the central bank’s approval.

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When asked whether account holders could be quizzed if all taxes had been paid on the money deposited in foreign currency accounts, the acting SBP Governor, Saeed Ahmad, said that these accounts fell under the central bank regulations.

However, the acting governor said that the central bank did not generally intervene and left the market to follow these regulations.

Mandviwalla opined that even question about tax evasion could not be asked under the 1992 Act.

He said that bilateral and mutual legal assistance treaties allowed exchange of information about account holders and Pakistan had signed such treaties with only five countries and none with any known tax havens.

He said that even United Nations’ Conventions against Corruption and Swiss Law on return of illicit assets could not prove helpful in case of Pakistan.

Mandviwalla said that the only treaty that could have been of some use was Organization for Economic Cooperation and Development (OECD), but Pakistan was not a signatory. He said the OECD treaty killed all bank secrecy laws.

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Mandviwalla explained that setting up offshore companies was not illegal, as half of the global trade passed through offshore companies. The only illegality about offshore companies was tax evasion and laundered money.

Published in The Express Tribune, April 28th,  2016.

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COMMENTS (8)

Tahir | 4 years ago | Reply | Recommend The fact is that so far these so called ruler (lawmakers) have made laws only to protect and advance their own interests, never ever for the common man of Pakistan they snatch votes from to rule them. The 1992 Economic Reforms Act is one of the many deliberate criminal acts our "lawmakers" have done and are doing to the masses in the name of 'democracy'. Enough is enough; its time now or never to get rid of these suckers.
Aman siddiqui | 4 years ago | Reply | Recommend Even if one considers that this immunity was granted under the law enacted in 1992, this should not cover people in public office due to conflict of interest and ethics ie you cannot grant immunity to yourself. Even so, the election tribunal requirs you to declare your assets albeit that they may enjoy tax immunity . Any civilization society will demand so from people in public office. Having said the above I am of the view that people should have the right to do whatever they wish from the tax paid money they have earned. It should not be the business of the state to put controls on where and in which currency they choose. It is a fundamental human right and intrusions by the state are infringement of basic and fundamental rights and liberties . Protection of property is a basic right. If people fir whatever reason don't feel comfortable in keeping their money in Pakistan, the state has no business in forcing them to keep the money here. It is equally a citizens right to demand protection of his life and property from the state organs
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