Fraud: Miscreants always a step ahead of our authorities

How the SBP notice to a pan wala exposed capital flight from Pakistan.

KARACHI:

For a few days, a letter from the State Bank of Pakistan (SBP) was just another piece of paper for 28-year-old Muhammad Raheel. After all, he had worked at a betel-leave-and-nut shop since he was 16, earning a little over Rs8,000.

What could the central bank want from him?

But the letter, which Raheel had left over a worn-out cupboard in his family’s small two-room apartment in FB Area, was a show cause notice that demanded explanation why he hasn’t remitted $57,713.50 (Rs5.7 million) back home after exporting fennel and cumin seeds to Poland.



“A SBP official visited my place 15 days after the letter had been sent,” Raheel told The Express Tribune. “It was only then that I realised how serious this was.”

And it turned out to be much more serious than what Raheel, who faces a potential penalty of Rs29 million, could have imagined.

The case is set to open a Pandora’s box of what is wrong with foreign exchange dealings in Pakistan — weak oversight of commercial banks and the regulator, failure to enforce compliance protocols, fake bank accounts on non-existing company address using a paan wala’s National Identity Card (NIC).

Export was made by a dubious company titled the AKS Commodities Corporation, which according to references available on multiple trade-related websites, is owned by one Rashid Butt and registered in DHA, Karachi. All the mobile and landline numbers have either been disabled or switched off.

Since he received the notification from the SBP’s Adjudicating Officer Muzaffar Akhlaq, Raheel has approached the Sindh High Court (SHC) with help from the Sarim Burney Trust.

“What amazes me the most is the central bank’s ignorance,” social activist Sarim said. “Wasn’t it easy to figure out that the poor man was simply cheated? Why aren’t they investigating how the fictitious company was used to export and hide the remittances?”

The SBP summon landed at Raheel’s door because the company AKS Commodity Corporation was registered under his name and the exports were made against details of his NIC.

“I don’t recall giving my NIC to anyone. I don’t even have a bank account. I have never even been to a branch of any bank,” insisted Raheel.

Pakistan has for long fought to stop illegal transfer of money. But culprits have always been a step ahead of authorities.

Forex Association of Pakistan Chairman Malik Bostan said he has never come across such a case in his decades-long career.

“This appears to be an attempt to convert black money into white money. I seriously think the Federal Investigation Agency should take up this case and investigate it.”



Drug dealers, extortionists, rogue government officials taking bribes and terrorists use such tactics to move foreign exchange in international markets, banking industry officials say.

“This could also be the case of hundi and hawala (off the book transactions). The perpetrator of the export deal will wait for heat to subside and then bring back the money under some incentive scheme. No one will even notice,” said a foreign exchange dealer.

The most disturbing part of the entire episode is conduct of officials at the Bahrain-based Islamic bank, which was used by AKS Corporation to export the goods.

“Some of the officers are calling us again and again to ‘settle’ the matter,” said Muhammad Arif, Raheel’s uncle.

“They want us to withdraw the case. In return, we are being assured that the SBP won’t bother us. But what if my nephew’s ID card has been used to undertake other transactions?”

Another official said that weak oversight of different agencies like the Federal Board of Revenue make it easy for personal details of citizens to be misused.

Whatever the case, Raheel’s fate hangs in the balance.

Published in The Express Tribune, July 7^th, 2014.

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