LHC backs strict observance of money-laundering law

The Lahore High Court (LHC) has ruled that tax evaders cannot escape from criminalisation and confiscation of proceeds of crime under anti-money laundering law, further strengthening the AML regime.

In a landmark judgement, the court said that the Directorate General Intelligence & Investigation of Inland Revenue can initiate proceedings against the people who had possibly laundered tax-evaded money under the Anti-Money Laundering Act (AMLA) 2010.

The court decreed that anyone found to be violating the Anti-Money Laundering Act 2010 can be proceeded against by filing of FIR, issuing summons and call-up notices, and its supported records can be used with all kinds of notices.

The detailed judgement, which came on a set of writ petitions, is considered to be a landmark achievement of the anti-money laundering regime in general and FBR in particular.

The following were four categories of writ petitions: 1) The petitioners challenged the filing of FIRs under Anti-Money Laundering Act 2010 by the three regional Directorates (Lahore, Faisalabad & Multan) of the Directorate General Intelligence & Investigations Inland Revenue. The LHC dismissed such writ petitions.

2.           The petitioners challenged the summons issued under section 160 of the Code of Criminal Proceedings. The LHC dismissed such writ petitions.

3.           The petitioners challenged the call-up notices (preliminary inquiry) duly supported with detailed reasons. The court dismissed such writ petitions.

4.           The petitioners also challenged the call-up notices, which were not duly supported with detailed reasons. The LHC allowed such writ petitions but held that the record/evidence/information already collected during the investigation can be utilised in case fresh notices are issued.

The court scrutinised the entire AML regime and upheld the vires of notifications issued by the federal government and the Standard Operating Procedures (SOPs) issued by the Directorate General I&I IR.

The judgement held that there was no substance in the contention that the investigating officers were treating the matter as one of audit under the Income Tax Ordinance and were thus conducting a roving inquiry.

“The investigation is being carried out for the offence of money laundering with which the proceeds of crime have a positive correlation,” it said and specified that a person is said to have committed the offence of money laundering if he indulges in any of the matters covered in section 3 of the Act relating to property derived from proceeds of crime through the commission of a predicate offence.

‘Directorate I&I is an investigating, prosecuting agency’

“The offences which have been made predicate in all the cases before this court stem out of the Income Tax Ordinance,” it noted and added that the Directorate (I&I) is the investigating agency, which is part of the FBR and is expected to have expertise in such matters.

In any event, information gathering during an investigation is a legitimate part of the Act to ascertain whether the acquisition of the property by the person concerned is connected with the proceeds of the offence of money laundering.

The LHC’s order stated that the Directorate (I&I) is the “investigating and prosecuting agency” under the Act for the purposes of investigating the offence of money laundering. Even so, it has the necessary expertise, being part of the FBR, to investigate matters underlying the offence of money laundering including the fact that the tax sought to be evaded is 10 million or more.

The offence of money laundering is intrinsically linked to and dependent upon the predicate offence and, therefore, any investigation must necessarily be conducted also in respect of the latter by the investigating officer under the Act.

The LHC’s order said that it is decided that the writ petitions mentioned in Schedule C are allowed and the notices impugned therein are set aside for being without lawful authority and of no legal effect.

“The record/ evidence/ information already collected by the Directorate (I&I)/ investigating officer in these cases during an investigation can be utilised in case fresh notices are issued,” the order said.

The Directorate (I&I) and the investigating officers are directed to strictly adhere to the law laid down in judgments reported as Ghulam Hussain Baloch and another v National Accountability Bureau, etc., PLD 2007 Karachi 469 and Ghulam Muhammad Vs Secretary Housing, etc., 2018 CLC 176 during the investigation process, the LHC’s order added.

Similarly, the judgement said, the issue with regard to the registration of FIRs has already been dealt with above by holding that the investigating officer can register the same after receiving a report from the Financial Monitoring Unit (FMU).