The offense of money laundering could be perceived as being an offense against the State/Society especially if it concerned the non-payment of duties, taxes which may fall within the domain of the Ministry of Finance.
Today such an offense does exist and the offense itself is not only a very menacing one but also a transnational crime and in order to combat it, the FIA have the required expertise, have been specifically empowered, along with other specialized agencies, to investigate it through the AMLA whether it concerns a private person or a Government official.
Today the FIA is investigating many white-collar crimes which do not necessarily involve Government officials. For example the exact case and the AKD case. The FIA can investigate alleged cases of money laundering by private individuals under the AMLA.
Most money laundering cases are not as straightforward because it is a sophisticated white-collar crime which is notoriously difficult to prove as various mechanisms such as the creation of “offshore companies” etc have been used to hide the illegally acquired money often in other person’s names etc. which may attract the AMLA. Such investigations often require the use of highly specialized asset tracers and forensic audits to uncover whether any of the funds in the various offshore accounts are legitimate or not.
In such complex investigations where there are no documents in hand, the logical starting point is often to monitor the persons or companies’ bank accounts. If a suspicious transaction is found in a bank account attempts can be made to see if it has arisen on account of proceeds of crime and as such would amount to a predicate offense as defined under S.2(s) AMLA so as to bring it within the purview of the AMLA.
The point is that an investigation under AMLA is not precluded because a predicate offense has not already been found. The scheme of the AMLA through the FM allows the FMU the ability to identify a suspicious transaction and then work backward to see if the suspicious transaction may have arisen out of proceeds of crime which are the fruits of a predicate offense which may then bring it within the ambit of the offense of money laundering and then pass on such information to the investigative agency under the AMLA to follow up on and potentially make a case of money laundering.
Of course, not all suspicious transactions will lead to the offense of money laundering having been committed as often the account holder may be able to justify that the transaction has come from a legitimate source of funds.
In this respect for this very purpose, the FMU has been established by virtue of Section 6 AMLA. Section 6(4) (a), (b), (c), (j), and (k) seem most relevant for the present purposes and are set out below for ease of reference:
“S.6 (4) The FMU shall exercise-the following powers and perform the following functions, namely:-
To receive Suspicious Transactions Reports (STRs) and CTRs from financial institutions and such non-financial businesses and professions as may be necessary to accomplish the objects of this Act.
To analyze the Suspicious Transactions Reports and CTRs and in that respect, the FMU may call for records and information from any agency or person in Pakistan (with the exception of income tax information) related to the transaction in question. All such agencies or persons shall be required to promptly provide the requested information;
To disseminate, after having considered the reports and having reasonable grounds to suspect, the Suspicious Transaction Reports and any necessary information to the investigating agencies concerned as described in clause (j) of section 2
To engage a financial institution or an intermediary or such other non-financial businesses and professions or any of its officers as may be necessary for facilitating the implementation of the provisions of this Act. the rules or regulations made hereunder: and
To perform all such functions and exercise all such powers as are necessary for, or ancillary to the attainment of the objects of this Act,
The system, however, seems to be dependant on Section 7 AMLA which provides the procedure and manner for furnishing information by the financial institution (which as per S.2 (f) are largely any kind of institution which is involved in the financial services industry e.g. banks) and other non-financial businesses and professions (which are generally persons dealing with areas where proceeds of crime can be hidden e.g. jewelers, estate agents or assist in the same i.e. professionals such as accountants) which for ease of reference is set out as under:
“Section 7. Procedure and manner of furnishing information by the financial institution or reporting entities.–(1) Every financial institution shall file with the FMU, to the extent and in the manner prescribed by the FMU, Suspicious Transaction Report conducted or attempted by, at or through that financial institution if the financial institution and reporting entity knows, suspects, or has reason to suspect that the transaction or a pattern of transaction of which the transaction is a part:-
Involves funds derived from illegal activities or is intended or conducted in order to hide or disguise proceeds of crime;
Is designed to evade any requirements of this section; or
Has no apparent lawful purpose after examining the available facts, including the background and possible purpose of the transaction; or
Involve financial terrorism.
Provided that a Suspicious Transaction Report shall be filed by the financial institution or reporting entity with the FMU immediately but not later than seven working days after forming that suspicion.
Any other Government agency, an autonomous body, or regulatory authority may share intelligence or report their suspicions within the meaning of suspicious transaction report or CTR to FMU in the normal course of their business and the protection provided under Section 12 shall be available to such agency, body, or authority.
All CTRs shall, to the extent and in the manner prescribed by the FMU, be filed by the financial institutions or reporting entities with the FMU immediately, but not later than seven working days, after the respective currency transaction.
Every reporting entity shall keep and maintain a record relating to Suspicious Transactions Reports and CTRs filed by it for a period of five years after reporting of transaction under subsections (1), (2), and (3).
The provisions of this section shall have effect notwithstanding any obligation as to secrecy or other restriction on the disclosure of information imposed by any other law or written document.
Notwithstanding anything contained in any other law for the time being in force, any Suspicious Transactions Reports required to be submitted by any person or entity to any investigating and prosecuting agencies shall on the commencement of this Act, be solely and exclusively submitted to FMU to the exclusion of all others.”
As can be seen from Section 7 almost the entire potential of a money-laundering investigation will turn on whether the financial institution spots a so-called suspicious transaction since the other reporting entities are unlikely to report little, if anything.
If the financial institution fails to spot or recognize or consider that a transaction is not suspicious and fails to report it to the FMU then the FMU is powerless to follow up on the suspicious transaction since it would never have been made aware of it.
The whole system of the FMU and its role in tracking down cases of money laundering is therefore in our view dependent on the vigilance of the financial institutions which may very well take a larger perspective/benefit of doubt view before reporting any of its clients for carrying out suspicious transactions.
This is because to report on customers/clients may lead to the loss of present as well as future business for the concerned financial institution notwithstanding Section 33 AMLA which concerns sanctions for those financial institutions which fail to report suspicious transactions under Section 7 AMLA.
The FIA in investigating cases of money laundering can on its own motion based on reliable/credible information open its own investigation into money laundering under the
AMLA independently of the FMU especially in cases where the initial information is not based on banking transactions or on information from financial institutions
The offense of money laundering:
Section 3 of the Anti-Money Laundering Act, 2010 deals with the crimes of money laundering inside or outside Pakistan which is reproduced as under;
A person; shall be guilty of the offense of money laundering, if the person:-
acquires, converts possesses, uses, or transfers property, knowing or having reason to believe that such property is proceeds of crime;
conceals or disguises the true nature, origin, location, disposition, movement or ownership of property, knowing or having reason to believe that such property is proceeds of crime;
holds or possesses on behalf of any other person any property knowing or having reason to believe that such property is proceeds of crime; or
participates in, associates, conspires to commit, attempts to commit, aids abets, facilitates, or counsels the commission of the acts specified in clauses (a), (b), and (c). Explanation-I.- The knowledge, intent, or purpose required as an element of an offense set forth in this section may be inferred from factual circumstances in accordance with the
Qanun-e-Shahadat Order, 1984 (P.O. 10 of 1984).
Explanation II.- For the purposes of proving an offense under this section, the conviction of an accused for the respective predicate offense shall not be required.”
It is apparent from the definition that the offense of money laundering will only be attracted if the money’s, assets, property, etc are acquired through the proceeds of crime e.g. corruption, extortion, etc and there is an attempt to in effect hide the illegal source from where the funds came.
Jurisdiction of court in money laundering cases:
Section 20(1)(a) of the AML Act, 2010, deals with the jurisdiction of the Court which is reproduced as under:
The Court of Session established under the Code of Criminal Procedure, 1898 (V of 1898) shall, within its territorial jurisdiction, exercise jurisdiction to try and adjudicate the offenses punishable under this Act and all matters provided in, related to or arising from this Act.
Where the predicate offense is triable by any court other than the Court of Session, the offense of money laundering and all matters connected therewith or incidental thereto shall be tried by the Court trying the predicate offense;
A plain reading of the above Section abundantly makes it clear that the Court of Session established under the Code of Criminal Procedure, 1898 shall within its territorial jurisdiction, exercise jurisdiction to try and adjudicate the offense (s) punishable under this Act and proviso
of the said Act clearly shows that if the predicate offense is triable by any Court other than the Court of Session, the offense of money laundering and all the matters connected therewith or incidental thereto shall be tried by the Court trying the predicate offense (s).
Inquiry and investigation:
So far as the question of inquiry and investigation, under the FIA Act and FIA Rules neither inquiry nor investigation is defined although both terms are used in the FIA Act. However, section 2(j) of AMLA defines an investigating agency as under:
Section 2(j) “Investigating or prosecuting agency” means the National Accountability Bureau (NAB), Federal Investigation Agency (FIA), Anti-Narcotics Force (ANF), or any other law enforcement agency as may be notified by the Federal Government for the investigation or prosecution of a predicate offense;
Section 2(k) AMLA defines an investigating officer as under;
Section 2(k). “Investigating officer” means the officer nominated or appointed under section 24.
Sections 24 and 25 AMLA provide as under in respect of investigating officers.
Section 24. Appointment of Investigating Officers and their powers.-(1) The investigating agencies, as provided in clause (j) of section 2, may nominate such persons as they think fit to be the Investigating Officers under this Act from amongst their officers.
Section 25. Officers to assist in inquiry, etc.— The officers of the Federal Government, Provincial Government and local authorities, financial institutions are hereby empowered to assist the Investigating Officers and agencies and other authorities in the enforcement of this Act.
Section 4(k) Cr.P.C. defines an Inquiry as under:
Section 4(k) “Inquiry”. “Inquiry” includes every inquiry other than a trial conducted under this Code by a Magistrate or Court:”
Section 4(l) Cr.P.C. defines an investigation as under:
Section 4(l) “Investigation”. “Investigation” includes all the proceedings under this Code for the collection of evidence conducted by a police officer or by any person (other than a Magistrate) who is authorized by a Magistrate on this behalf.
As per Cr.P.C. definition of investigation and the definitions used in the AMLA (which exclude inquiry) in our view, it appears that the FIA was carrying out an investigation under the AMLA as opposed to an inquiry and as such the FIA application under Section 94 Cr.P.C. was entertainable and the District and Sessions Judge had the power to pass the order which he made after judicial application of mind.
In the FIA Act and AMLA, it appears that little turns on whether an inquiry or investigation is being carried out (unlike the National Accountability Ordinance 1999(NAO) where under Section 25 a Voluntary Return (VR) can only be made at the inquiry stage and not at the investigation stage where only a Plea Bargain (PB) is available with the VR and PB options having distinctly different legal consequences.