Tax authorities seek suspicious transaction details from banks

KARACHI: Tax authorities have sought banks’ assistance to curb tax evasion by flagging suspicious financial transactions, sources said on Friday.

The source said the Federal Board of Revenue (FBR) asked banks to share with the board details of foreign trade, detected under anti-money laundering laws.

“The purpose for obtaining the transaction details is to spot on tax evasion and make recovery,” said a senior FBR official.

The official said the FBR, State Bank of Pakistan (SBP) and Securities and Exchange Commission of Pakistan agreed, under the national action plan, to exchange information to stop terror financing and prevent revenue losses.

Under this arrangement, the banks are also bound to provide details to the respective authorities, including the financial monitoring unit (FMU) of the ministry of finance, the official added.

Recently, the SBP directed banks to improve monitoring on transactions related to both imports and exports under anti-money laundering/combating the financing of terrorism laws.

The SBP said trade transactions have the elements of under- and over-invoicing, which facilitates transfer of value across the borders. “Primary responsibility in this regard lies with Pakistan Customs; however, since documents are negotiated and letter of credit settled through formal banking sector banks are required to enhance their capacity to process foreign trade transactions with extreme care and diligence.”

The SBP also directed the banks to enhance diligence of remittances to check illegal transfer.

The FBR official said reports of all suspicious transactions, which the banks are required to share with SBP and FMU, must be submitted to the FBR under the law.

Banks are required to provide a copy of each currency and suspicious transaction reports to the FMU under the Anti-Money Laundering Act 2010.

The SBP asked the banks to implement an in-house system to detect differences between the values declared in the documents and prevailing market prices. “In addition, banks need to set out escalation procedures to manage transactions where significant differences in prices are identified,” the SBP said.

The FBR official said the latest SBP’s directives regarding the customs valuation monitoring to identify under- and over-invoicing will help the revenue authority to revisit its mechanism to fixing customs valuation.