FBR investigating investment in crypto-currencies

Islamabad

The FBR’s anti money laundering (AML) cell has launched investigation into the financial affairs of persons having massive investments in crypto-currencies, including bit-coins as it is being used allegedly for the purpose of money laundering.

The FBR has issued notices to some major players for further investigations. According to details available with The News state that the Anti Money Laundering (AML) Cell of the Directorate General Intelligence & Investigation – Inland Revenue Islamabad has started investigating the financial affairs of persons having huge investments in crypto-currencies, including bit-coins.

It has been learnt that tax evaders and fraudsters have found a new way of tax evasion and money laundering. They are buying bit-coins to launder the tax evaded money and in many cases parking of their black money out of Pakistan.

It is pertinent to mention that tax evasion is a predicate offence under the Anti Money Laundering Act, 2010, and the government of Pakistan has appointed the Directorate General I&I-IR as the investigating and prosecuting agency in cases of money laundering where tax evaded money is laundered or attempted to be laundered.

Trade of bit-coins (virtual currency / cryptocurrency) is on rise in Pakistan, and during the initial inquiry, it was revealed that bit-coins are being traded in Pakistan mostly against cash. Present price of bit-coin is hovering around Rs200,000 and upon receipt of credible information, the Directorate undertook a search to trace and track the trade of bit-coins to nab culprits who are involved in the heinous crimes of tax evasion and money laundering.

Summons were issued to some of the major traders of bit-coins for further investigating their affairs, who are facilitating the trade of crypto-currencies without reporting it in their tax declarations. These individuals are the major traders of bit-coins.

As per one report published online, trade volume of bit-coins increased 400% only during December 2016 in Pakistan. It is pertinent to mention that due to decentralisation of peer-to-peer online transactions and their anonymity, there are various instances where bit-coins have been used as a tool for money laundering as currently there are no laws regulating the trade in said currency. Currently, the cryptocurrency is not recognised as a form of currency by the State Bank of Pakistan and is, therefore, traded as a commodity.

During the inquiry, it was found that major traders of bit-coins, who have traded thousands of bit-coins are employed in a multinational telco company in Islamabad and are also maintaining bank accounts in few other countries. However, the traders were not reporting their business activities before the tax authorities, raising suspicions of money laundering.

Since the under reference area possesses high risk of tax evasion and money laundering; therefore, further inquiry is being carried out to gauge actual quantum of trade in bit-coins, to scrutinise whether income derived there from is being properly reported under the tax laws, and if not, to investigate any possible tax evasion or money laundering being committed through this innovative technology, keeping in view relevant provisions of Income Tax Ordinance 2001 and Anti Money Laundering Act 2010.

Comments: These days anti-money laundering and fraud agencies have their hands full investigating suspect financial transactions at home and abroad. But such diligence and tenacity is sorely need to combat and detect hidden tax evasion techniques, money laundering schemes, and bribery, to include drug and human trafficking among other criminal activities. Lately, I have noticed the use of crypto-currencies by unsuspecting and very often willing confederates in the criminal world of cyber hacking, money laundering, and out right theft of money. Let us hope the bad actors don't spoil the use of crypto-currencies for the rest of us.