Following the orders of the Supreme Court (SC) to inquire about the fictitious bank accounts that were apparently used for laundering billions of rupees of black money, the Federal Investigation Agency (FIA) began to probe 150 odd fake bank accounts created in the names of lay individuals such as hawkers, labourers, domestic workers, and rickshaw drivers.
The fake accounts involved in money laundering caught greater attention after the newly elected Prime Minister Imran Khan declared his resolve to fight corruption and recover billions taken out of the country.
In September the Supreme Court formed a six-member Joint Investigation Team (JIT) comprising FIA’s senior officials, to investigate the news that around Rs53.3 billion had passed through hundreds of false accounts, using the names of individuals.
The court listed two central leaders of Pakistan People Party’s (PPP) — former president Asif Ali Zardari and his sister Faryal Talpur — along with 12 others among the beneficiaries in an alleged scam “running into billions of rupees” that had earlier led to the arrest of Hussain Lawai, chairman, Pakistan Stock Exchange, in July this year. The PPP termed FIA’s probe as “political victimisation”.
On October 22, the JIT submitted a progress report in the Supreme Court, revealing that transactions of Rs54 billion had been made through 107 fake bank accounts.
In the cases where fake accounts are opened, the money launderers deposit money into bank accounts of poor residents and then swiftly empty them in a laundering scheme that has likely seen hundreds of millions of dollars disappear from the country.
The issue of fake accounts came to light in late September when Abdul Qadir, a street side falooda vendor and a resident of Karachi’s impoverished neighbourhood of Orangi Town, received Rs2.25 billion in his account. Qadir’s account remained operational through 2016 when it was reported by State Bank of Pakistan’s Financial Monitoring Unit to the FIA. The FIA informed Qadir and, after a thorough probe, found him innocent. Three days later, a student in Punjab’s Jhang district was informed that he had become a ‘millionaire’ after Rs170 million was found stashed in a bank account in his name.
Soon, a series of mysterious deposits in bank accounts of innocent individuals across the country surfaced. In one case, Iqbal Arain, who had passed away in May 2014, was shown to have three bank accounts mysteriously opened in his name after his death. Transactions of Rs4.6 billion were found to have been conducted through these fake accounts.
Rickshaw driver Zor Talab Khan from Karachi’s Old Sabzi Mandi area is a more recent case. He was shocked when the FIA told him that a transaction of over Rs8 billion had been made in his name from private bank accounts in Karachi and Buner, his hometown in Khyber Pakhtunkhwa. “The accounts in Khan’s name were actually being used and handled by Ammara Khan, a resident of Buner, who has been summoned by the FBR for initial questioning on November 20,” an FIA official reveals.
The FIA claims to have dug up 30 fictitious accounts in KPK from which transactions worth billions of rupees had been made. Most of these accounts were traced to the province’s far-off areas in Swat and Shangla. “We have recently completed inquiries into the benami (nameless) accounts and are now going to register FIRs against the account holders,” Mirwais Khan, a senior FIA official, told the media. “Most of the accounts — opened in the domestic servants’ names — are for money laundering purposes as the amount transacted had not been used for business purposes.”
In its report submitted before the apex court, FIA’s JIT stated that several bank accounts used in suspicious transactions had been opened for a brief period of time and closed after the money was transferred.
Analysts are concerned about the timing of the surfacing of fictitious accounts at a time when the country is under the watch of the Financial Action Task Force (FATF), a Paris-based anti-money laundering monitoring body, which has moved Pakistan into the gray list from the white. The organisation has been demanding of Pakistan to uncover the link between terrorists and black money. According to a report that appeared in The News on October 10, the FATF’s Asia Pacific Group has asked Pakistan to track down all financial transactions ranging from 3000 to 15,000 US dollars/Euros in cash through real estate agents, dealers in precious metals and stones, lawyers, notaries, other independent legal professionals and accountants as well as trust and companies services in a bid to curb money laundering and terror financing.
After the fake accounts were uncovered, questions have been raised about banks and their procedures. The FIA officials probing the cases as well as bankers believe it is not possible to open a fake account without the consent of bank’s branch manager. “The concerned banks or their staff are active partners in crime,” says an FIA official.
A banker seconds the official: “The illegal practice of opening accounts on fake documents still goes on in the country and accounts are opened under political pressure.”
Experts say the State Bank of Pakistan (SBP) has several policies to prevent the banking sector from money laundering, terror financing, transfer of illegal/ill-gotten money and as a conduit for white collar crime. But the issue is its proper implementation.
AB Shahid, a banker, says that the SBP has an anti-money laundering policy that demands a strict ‘Know Your Client’ implementation. “According to it, all reasonable efforts should be made to determine the true identity of every prospective customer — production of several things, including a Computerised National Identity Card, the applicant’s physical presence, and a reference of a reliable current account holder from the same branch, a statement of purpose of opening the account, and an estimated amount of transactions.”
In this regard, the SBP issued strict directives to private banks and decided to conduct biometric verifications of account holders to identity fake accounts. Bank accounts opened before 2016 would be subject to verification in a phased manner, according to the SBP spokesperson. The FIA is responsible for investigation and taking legal action against those involved in opening of these bogus accounts,” the bank official says.
In January 2017 it was a new thing. Many parliamentarians, including the then National Assembly Speaker Ayaz Sadiq, then Senate Chairman Raza Rabbani and then Leader of the Opposition in the National Assembly Syed Khurshid Shah, claimed that fake bank accounts had been opened in their names and that transactions worth tens of millions of rupees had been made from those accounts.