SBP seeks security officials’ help to curb forex smuggling

KARACHI: The central bank sought help of security officials to check suspicious inland movement of foreign currencies to curb their smuggling or use in terror financing as Pakistan is feared to be put on the ‘grey list’ of the Financial Action Task Force (FATF) in June this year, sources said on Friday.

Well-placed sources told The News that the State Bank of Pakistan (SBP) wrote letters to the Federal Investigation Agency, Federal Board of Revenue and other border agencies to take appropriate action in accordance with the law to keep vigil on inland movement of cash foreign currencies in bulk by unauthorised individuals or entities.

“We can safely assume such transactions are meant for smuggling or terrorist financing,” a source in the central bank said.

“An immediate action is important in the wake of ongoing mutual evaluation by APG (Asia Pacific Group on Money Laundering) and FATF.”

Pakistan may be enlisted in the grey list in FATF’s June review due to its strategic deficiencies in curbing money laundering, although government was optimistic that the enlisting would not have negative economic fallouts. Sources said the SBP considered the smuggling of foreign currencies as a ‘challenge’.

“The unhindered and unexplained inland movement of such currencies in bulk may serve as the conduit of its smuggling across borders,” a source who’s seen a SBP’s letter said. “The motives of such transportation could be manifold including settlement of hawala transactions.”

Sources said this inland movement of foreign currencies entails serious risks from the perspective of money laundering and financing of terrorism through provision of funds in cash to the proscribed individuals/entities.

“Accordingly, there is a need for a pro-active approach to discourage the inland movement of foreign currencies and avert their potential damaging ramifications for our system,” the source said. “As would be appreciated, State Bank of Pakistan has already put in please necessary controls for movement of cash foreign currencies by both banks and exchange companies as part of their businesses.”

Sources in the SBP said some exchange companies were found involved in currency smuggling across the country in the past. Foreign exchange firms have advised the central bank to give incentives to security officials to prevent illegal use of foreign currencies. They should be awarded with half of the amount confiscated at airport or sear port, the currency dealers said at a meeting with the SBP’s officials.

In March, the central bank proposed amendments in Protection of Economic Reform Act 1992 to empower law enforcing agencies to get declaration of cash foreign currencies from people coming to the country or going abroad.

Currently, a passenger can carry up to $10,000 or equivalent notes of another currency while travelling abroad. But, law enforcement agencies find themselves helpless because of their inability to question the passengers about the source of cash and other details to curb money laundering.