Pakistan mulls online L/C verification to curb trade-based money laundering

Pakistan’s Federal Board of Revenue (FBR) is reportedly about to launch a mechanism for online verification of letters of credit (L/Cs) with the country’s banks.

The aim is to curb trade-based money laundering (TBML), with under-invoicing in particular a target.

Document tally

A senior official of Pakistan Customs told local media that a mechanism is being developed with the State Bank of Pakistan (SBP) to verify that the value of L/Cs opened matches the value of import proceeds.

The FBR and SBP recently launched the online submission of Form-E, which is an export declaration form that can be used to verify that L/Cs issued for exports match the value of the goods actually shipped.

Forex losses

In the past, fake forms have deprived the country of foreign exchange as exports were sent abroad without inflows.

With the online L/C verification, customs authorities should be able to identify the country of origin, the value of an imported item and the total amount remitted to the foreign seller.

Heavy losses

The system aims to help curtail under-invoicing and smuggling and responds to an

FBR report that found importers had under-invoiced by US$2.43 billion in 2013, just in trades between Pakistan and China. Another US$829 million was over-invoiced in the same year.

Tax officials are reported as saying the current value of under-invoicing is around US$6 billion a year.



Categories: Trade Based Financial crimes News

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