Financial Institutions Penalized by State Bank of Pakistan Over Solar Panel Import Scandal
During the committee briefing, Senator Sadia Abbasi emphasized the need for the SBP to present comprehensive details of the case in the upcoming meeting, echoing concerns raised by Senator Musadik Malik about the over-invoicing of billions of dollars, referring to the case as a "Hundi."
Karobar
In a major development, the State Bank of Pakistan (SBP) has taken punitive action against certain banks for their failure to detect and prevent massive money laundering and over-invoicing amounting to Rs69.5 billion by solar panel importers.
The SBP's Executive Director revealed on Wednesday that penalties were imposed on banks that neglected to raise "Red Flags Indicators" within the framework designed to manage the risk of trade-based money laundering. These penalties were applied to banks that approved the FI (declared invoice value for transfer).
While the specific banks and penalty amounts remain undisclosed, the Senate Standing Committee on Finance has directed the SBP to provide this information, along with details of other regulatory measures taken to combat fraudulent activities by solar panel importers.
FBR officials shared insights that five banks accepted substantial cash deposits amounting to Rs14 billion in the case of M/s Bright Star Business Solution (Pvt) Ltd. Senator Malik highlighted the scale of the issue, with 63 importers involved in transactions totaling Rs7 billion, only 200 out of 450 importers audited, and a massive scam of Rs70 billion uncovered.
The FBR revealed that 6,232 goods declarations filed by 63 importers identified over-invoicing worth Rs69.5 billion. The FBR has registered eight FIRs covering Rs40.94 billion, representing 60% of the total amount in 3,161 goods declarations.
Additionally, a Quetta-based cartel of three dummy companies was discovered, leading to the arrest of a company proprietor. Peshawar-based cartels of two companies were also identified in connection with the scandal.
The FBR officials pointed out that banks failed to apply red flag indicators when dealing with fictitious solar panel clients, and they urged banks to provide details of currency transaction reports (CTRs) and suspicious transaction reports (STRs) in accordance with SBP regulations. However, some banks sought time extensions for replies, and incomplete information was submitted, raising concerns about compliance with anti-money laundering regulations.
It was disclosed that in the fiscal year 2020-21, two importers transferred import remittances worth Rs20.4 billion out of Pakistan, filing "Nil" income tax returns, indicating the illegitimacy of the funds. Banks also ignored Financial Monitoring Units (FMU) instructions, allowing large cash amounts to be deposited in the bank accounts of solar panel importers to obscure the origin of funds, with some transactions exceeding Rs10 million as "cash transfers."
