ISLAMABAD: The Senate Standing Committee on Finance on Wednesday regretted that the State Bank of Pakistan (SBP) had shared insufficient information on over Rs70bn established trade-based money laundering through the import of solar panels and ordered immediate payment to teachers their salaries pending since the start of the current fiscal year.

Senator Saleem Mandviwalla, who presided over the meeting, lamented that it was the third meeting of the panel on the subject but the latest report on money laundering through solar panel imports did not offer anything new or progress.

Other senators were of a similar opinion and wondered why the SBP was not forthcoming with full information when the Federal Board of Revenue (FBR) had established money laundering through duty-free imports of solar panels.

A representative of the SBP told the committee that banks involved in the case had been identified and fines had been imposed on them.

Senate committee seeks complete details of banks involved in scam

Senators including PMLN’s Musadik Malik and Saadia Abbasi and PTI’s Mohsin Aziz believed the central bank should not have withheld the names of the banks penalised and demanded that full details of the case be presented to the Senate panel.

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Senator Aziz said the money laundering was even more damning because the duty-free solar panels were imported at a time essential imports were restricted due to foreign exchange constraints.

Mr Mandviwalla said he had been suggesting the case should be referred to the Federal Investigation Agency (FIA) because a complete picture was not being shared with the committee. Mr Malik said the case presented before the panel by the FBR and Customs authorities suggested they had identified Rs70bn worth of money laundering by 63 importers through over-invoicing but this emerged through an audit of 200 out of 450 importers. The full audit may take the overall over-invoicing and money laundering to $2.5bn.

Customs authorities reiterated their earlier stance that the investigations into the case started in October 2022 and 63 importers were found involved in over-invoicing of solar panels. They said the money laundering took place through banks. They also explained that solar panels were not physically examined by the customs because they were duty-free items against whom payments are made through the banks and only good declarations (GDs) are presented to the customs desks.

The FBR had reported misuse of solar panels for “massive money laundering”, apparently with the connivance or negligence of banks, which failed to comply with SBP’s regulations on money laundering and even the central bank’s role was found wanting.

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It said the solar panels had emerged as a high-risk item for over-invoicing and trade-based money laundering due to their duty-free import status and the absence of sales tax on local supply.

Between 2017 and 2022, there has been a massive increase in solar panel imports, accompanied by the emergence of dummy companies exploiting duty- and tax-free imports to conduct illicit financial activities.

About Rs75bn worth of solar panels were allegedly imported from China, but payments were routed to the UAE or Singapore and all these panels were sold in the domestic market at almost half the price they were imported. For instance, sales tax declarations revealed that solar panels initially imported at Rs72.83bn were sold for just Rs45.61bn.

Customs officials said just eight persons imported Rs41bn worth of solar panels and 55 others were being looked into who had been served notices and who had responded. Large payments also were routed through Quetta to Dubai. The cases were registered against major suspects Rab Nawaz and his wife of Bright Star Company who were now on bail. Senator Mohsin Aziz said the Bright Star had laundered around Rs40bn through two banks.

Published in Dawn, November 30th, 2023