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Credit card widely misused to purchase virtual currencies abroad: DG FIA says legal lacunae preventing action against virtual currencies

January 16, 2022

KARACHI: The Director General Federal Investigation Agency (FIA) warned the banks not to make transactions using virtual currency mechanism as at present there is a legal lacunae in the country to check against its illegal operations and misuse.

Talking to The News, DG FIA Sanaullah Abbasi, he said the FIA is taking up the issue of critical legal lacunae with the State Bank of Pakistan on Tuesday for proceeding against this new mode of crime. At present cybercrime wing takes cognizance on the basis of online fraud, which is not adequate enough, Abbasi underlined. He said “the FIA is also investigating misuse of bank credit card for purchasing virtual currencies overseas, and wants the banks to guard against any violation of their system for transacting virtual currencies.”

Abbasi said work to investigate the $18bn cryptocurrency fraud has been intensified. He was confident of achieving a headway quickly. He said teams have been formed to review and investigate the virtual currency frauds being reported and will determine the way ahead by Tuesday. DG FIA said that there are hundreds of such websites around the world, where the cryptocurrency is operating and being used to fund terrorism, and added Dr Zafar, is one such accused in terrorist funding arrested eight months ago.

On a query upon legislation in Pakistan, DG FIA Abbasi said that, there is no law governing virtual currencies (VCs) in Pakistan. There is no regulatory framework for the virtual asset service providers (VASP) to comply with the FATF requirements. Similarly, there is no section of law available in PECA-2016,FERA-1947 and AMLA-2010 regarding illegal and misuse of cryptocurrency. In some cases, Cybercrime Wing FIA took cognizance against Section-23 of Foreign Exchange Remittance Act and AML Act 2010 in the larger interests of the people. The State Bank of Pakistan and SECP has adopted prohibited approach and issued various instructions on VCs. SBP is responsible of overseeing payment systems, foreign currencies and MVTs (SBP Act 1956, Payment Systems and Electronic Fraud Transfer Act 2007 and FER 1947). He added that, SBP issued advisory to public and bank, MFBs and PSOs to refrain from dealing with VCs, initial coins offering etc. The SECP issued a directive on August-27, 2020 directing all companies to ensure compliance with the aforementioned circular of SBP. The DG FIA said FIA is taking up the issue of critical legal lacunae with the State Bank of Pakistan on Tuesday for proceeding against this new mode of crime.

Abbasi said cryptocurrency, has raised financial concerns for governments worldwide. There has been no consensus to give meaningful utility or an intrinsic value to VCs thus challenging the capacity of the Central Bank. Moreover, no uniform international laws regulate VC despite its use for buying goods and services. Most of the central banks and SECPs refrain their regulated entities from dealing with VCs. Many developed countries US, Canada and the UK. Malaysia allowed bitcoin to be used and classified it as securities, Australia and Japan as property, Singapore as goods and South Korea as a digital asset.

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