ISLAMABAD - The Joint Investigation Team (JIT), which probed billion of `rupees alleged money laundering, in its report also revealed criminal negligence of State Bank of Pakistan (SBP) and Securities and Exchange Commission of Pakistan (SECP) for ‘deliberate violations’ of law assisting alleged money launderers to carry out the crime. 

The JIT report against former president Asif Ali Zardari, his sister Faryal Talpur, PPP Chairman Bilawal Bhutto Zardari and their groups besides concluding alleged money laundering to the tune of Rs.42 billion through fake bank accounts, also revealed failure of regulatory mechanisms of the state institutions.

The JIT has noticed an ‘abject’ failure of the premier regulatory institutions of the state like SBP and SECP in checking the unbridled growth of the money laundering cartel.

It also revealed that the entire Summit Bank was raised through a ‘fake’ equity injection using laundered proceeds of crime. “This should have been checked by the SBP,” stated the JIT.

“Not only that, the Summit Bank was allowed to illegally acquire and amalgamate Rupali, Atlas, Arif Habib and Mybank,” it added.

Moreover, the JIT termed the SECP as apparatus for alleged money launderers to proceed with the crime.

“The SECP instead of checking these illegal acquisitions and amalgamations played as second fiddle,” the report stated.

The JIT further stated that the ‘fake accounts’ were opened in ‘deliberate’ violation of the mandatory SBP Prudential Regulations pertaining to Anti-Money Laundering (AML) and Countering of Terrorism Finance (CTF).

Verification of Business Profile, Income, Expected Transaction Threshold, Obtaining   original   CNIC (individual) and Business Registration number for business entity, Identification of Beneficial Owner, Maintaining CNIC copies of all cash depositors/withdrawers were the primary mandatory requirements.

It is transpired during the investigations that CNIC copies were missing in cash deposits of Rs 2.81 billion and withdrawal of Rs 1.58 billion.

Another mandatory requirement of identification and background check along with documentation of suspicious transaction and cash transactions has also not been observed. 

“Transaction Monitoring System (TMS) in banks raised automatic “alerts” but they were deliberately ignored and not reported to Financial Monitoring Unit (FMU),” JIT Report stated.

The requirements of Business Address Verification Certificate and Call/ Visit Report,  Initiation  of  Suspicious  Transactions  Reports  (STRs)  and dispatch to FMU, maintaining  complete  record  of  transactions  with vouchers reflecting Counter Parties have also not been taken care of.

Investigations revealed that vouchers are missing or misappropriated in transactions amounting to Rs 1.8 billion.

It is further added that the fake entries were made in the expected transaction threshold.

Three banks namely Sindh Bank, National Bank of Pakistan and Summit Bank embarked on a lending spree to the front group of Asif Ali Zardari.

It would be relevant to point here that the above banks ought to have adhered to the SBP’s Prudential Regulations for Corporate/Commercial Banking (lending) which they ‘deliberately ignored’.

In mandatory requirements, the Regulation R1 allows exposure (loans) equal to maximum 25% of equity of bank to a single group.

Under the Regulation R8, banks may reschedule or restructure their loans as per their policy but it should not be merely to avoid classification.

The rescheduling and restructuring of non-performing loans shall not change the status of classification of a loan and advance unless the terms and conditions of rescheduling or restructuring are fully met for a period of at least one year.

“However, in this case forty-nine restructurings were made,” the JIT revealed.

Under the Regulation R5, the banks shall devise an appropriate mechanism to ensure that the financing extended is utilized for the intended purpose. Further, the banks will also ensure that financing is not used for non-productive purpose like hoarding, speculation etc. 

“However, in this case, many loans and subsidies of government have been found to be diverted and misappropriated.”

Under the Regulation O2, banks shall refrain from adopting any measures or practices in showing their deposits, MCR, nonperforming loans/assets, provisioning, profit, inter-branch and inter-bank accounts, or any other method to artificially inflate balance sheet or show improved profitability.

“Instances have been noted where loan obtained has been used for payment of interests on loan obtained from same bank,” the JIT report stated.

The SBP may check the valuations of the assets under mortgage/charge, through an independent evaluator, on random basis, to verify the reasonableness of the valuations.

However, the SBP failed to check the single evaluator (Tracom) and many other fraudulent techniques used by Omni Group, which acted as front-man of Zardari according to JIT Report, to take loans.

“The SBP failed to provide inspection reports of the banks under question to the JIT.”