Offbeat: Despite FATF pressure, Customs border force a distant dream

Published: May 15, 2019


LAHORE: Pakistan is fighting an uphill battle to curb smuggling, which has become a huge challenge for the Federal Board of Revenue (FBR). Despite assurances to the Financial Action Task Force (FATF), the formation of a customs border force has still not materialised. Despite suffering losses estimated at almost Rs450 billion every year due to smuggling and another Rs200 billion due to under-invoicing, the government has still not been able to push through practical and result-oriented assistance in different ministries and departments to effectively curb smuggling.

Red tape and jurisdictional issues exacerbate the situation. Responsibility for stopping smuggling rests with the interior ministry, according to the relevant laws. The ministry has to take steps in coordination with other ministries and departments to stop smuggling through various national borders.

Smugglers have also adopted non-traditional tradecraft after the fencing of the Afghan border began. A few years back, a Customs research report had informed that the share of smuggled goods available in Pakistan had increased and according to reasonable estimates, the national treasury was suffering losses of around $3 billion annually.

Customs had carried out this investigation on just 11 key items, which included mobile phones, diesel, plastics, auto parts, tires, motor vehicles, iron sheet, tea, cigarettes, and electronics. The total value of smuggled goods, including less significant items, would be even higher.

It is notable that the report prepared by Customs officers was not accepted by top FBR officials at the time, who had adopted the stance that the report is not up to modern investigation quality and principles. Sources said a decision was taken that the FBR gets its report prepared by the Pakistan Institute of Development Economics every year to estimate the amount and value of goods smuggled into Pakistan and the quantities seized.

This is because the customs department presents its performance based on the price and market value of smuggled goods, while less attention is given to raw quantities.

The government had assured the FATF last year and again a few months ago that a customs border force will be formed for curbing money laundering and smuggling. As of now, Customs still works under the Civil Servants Act and its anti-smuggling operations are also governed by the same act. Due to this being a civilian law, custom officials do not have various special law enforcement powers. If custom officials are killed in the line of duty in a conflict with smugglers, their heirs are not awarded any special grants similar to those of traditional law enforcement agencies such as the police.

Last year, Customs intelligence DG Zahid Hussain Khokhar preparing a report related to the formation of the custom border force that was sent up the chain in the FBR. The report highlighted the restrictions for custom officials working under the Civil Servants Act, including restrictions on the appointments of officials and inspectors while noting that the majority of customs officials are middle-aged or older and cannot be used effectively in field operations against smugglers.

The report informed that there is no mention of anti-smuggling coordination in the FBR’s rules of business. This responsibility rests with the interior ministry.

The report noted that Afghan Transit Trade used to play a major role in the smuggling network, but now the Afghan trade has increased through Iran. Even then, after reaching the Afghan border, goods worth billions of dollars find their way back into Pakistan.

A senior customs officer told The Express Tribune that the department cannot curb smuggling in the current situation unless there is better coordination and cooperation with military and paramilitary forces along the borders. This is because the customs department does not have enough trained staff to curb smuggling along the hundreds of miles of border. “Iranian diesel and petrol are brought openly to Pakistan. What could a few dozen custom officials do,” the official asked. 

Published in The Express Tribune, May 15th, 2019.

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