FBR Unearths Money Laundering and Tax Evasion Worth Billions

The Directorate of Intelligence and Investigation Inland Revenue (DI&I-IR) department of the Federal Board of Revenue (FBR), Karachi has unearthed a massive money laundering and tax evasion case worth Rs. 1.8 billion against the listed LPG marketing company, M/s Burshane LPG Pakistan Limited.

As per the details, the liquefied petroleum gas (LPG) marketing company was involved in tax evasion, organized financial crime, and used complex accounting techniques and shell companies to launder money out of the country through clandestine transactions and evade taxes.

Under the supervision of Director General Dr. Bashir Ullah, the directorate of I&I-IR Karachi has investigated the case and unearthed fraudulent activities and financial malpractice of the specified company.

The network for these activities was being operated by the CEO of the company that trades on the Pakistan Stock Exchange (PSX), along with other directors as well as the chief financial officer of the company. They were purchasing and selling smuggled LPG, bought through the Taftan border while keeping the related proceeds and transactions off the books.

Details have emerged that the said company has evaded taxes to the tune of around Rs. 1.775 billion, and the accused CEO, CFO, and other directors of the company have acquired properties worth billions from the proceeds of crime as defined under section 3 of the Anti-Money Laundering Act 2010. The Directorate of Intelligence and Investigation of Inland Revenue discovered properties worth billions of rupees acquired from illegal funds.

According to media reports, an official at the Directorate said the case is extremely organized. There was a complex structure of various bank accounts and banking transactions conducted by the company officials for the laundering of illegal money.

The officials that have been identified to be involved in these activities have also established various shell companies in which illegal money has been injected as equity against the issuance of shares, while these shell companies also declared salaries to directors and various expenses, and declared loss even before the commencement of operations.

In the tax year 2015, the company was fraudulently acquired by another private limited company by financing from the National Bank of Pakistan on the basis of defective land Khata (account). The same officials were the directors of the company at the time of the fraudulent merger which violated the provisions of Section 97A of the Income Tax Ordinance 2001, resulting in evasion of capital gains of around Rs1 billion.

The company also concealed investments of around Rs. 240 million in a private limited company M/s Roots International Private Limited and also concealed acquisition of the said company in the name of chief executive officer.

Moreover, the personal bank accounts of the CEO and other directors indicated huge case transactions in their personal bank accounts from undisclosed sources, and hefty credits from another listed company, which were apparently from the proceeds of smuggled LPG sold in the market.

The official said that the initial findings of the investigation revealed that the company concealed sales of Rs. 726 million and Rs. 828 million. It was also identified that the company had unexplained and out of book movement of funds of Rs. 389 million and Rs. 396 million in the tax year 2018 and tax year 2019, respectively, which might be from the sale of smuggled LPG in the market.

The official said the case was registered against the company before the court and the court allowed the freezing of nine bank accounts of the company for 90 days.

In this connection, the directorate filed complaint No.945/2020 under section 3, 4, 8, 9, 20, and 21 of the Anti-Money Laundering Act 2010, and the Customs & Taxation Judge has admitted the complaint, and the finding of the court is as under: “Since the Inquiry has resulted in detection of tax evasion of more than Rs. 10 million in terms of section 111(1) read with section 192 and 192A which are predicate offenses under the Anti-Money Laundering Act 2010, thus, prima facie case is mode out complaint be registered under section 192,192A,203 of the Income Tax Ordinance, 2001 read with section 3,4,8,20 &21 of the AML Act, 2010.

It is pertinent to mention that always BWS on the admission of the complaint was issued by the court. The perusal of section 21 of the AML Act 2010 mentions the offense under the Act is non-bailable, therefore, this practice should be discontinued from now on. issue NBWs against respondents.

According to the reports, the court has issued non-bailable warrants of CEO, chief financial officer, and the other two directors of the company. The role of the chartered account firm is also under investigation, in this case.

Share price takes a dent

It is to be noted that Burshane LPG’s share price at the stock market went on to touch a lower circuit breaker today. It was trading at Rs. 33.67, down by Rs. 2.37 or 7.50%, with a turnover of 135,000 shares.