A massive Rs106 billion ($375 million) money laundering scheme disguised as solar panel imports has been exposed by the Directorate of Customs Post Clearance Audit (PCA) South, operating under the Federal Board of Revenue (FBR). The alleged perpetrators, two brothers identified as Rab Nawaz and Ahmed Nawaz, are accused of orchestrating an elaborate scam involving over-invoicing, shell companies, and dual financial transactions to launder billions of rupees.
How the Scam Worked
Investigations revealed that the brothers utilized a network of seven shell companies based in Lahore and Peshawar to inflate the prices of imported solar panels significantly. Solar panels imported at $0.15 per watt were invoiced at prices ranging between $0.35 and $0.70 per watt, representing a markup of up to 500%. These inflated prices enabled the laundering of funds through commercial banking systems and other financial channels.
The shell companies implicated in the scam include:
Messrs Sky Linkers Trading Company Peshawar
Messrs Sky Linkers Business Chain Private Limited Peshawar
Messrs Bright Star Business Solution Private Limited Peshawar
Messrs Moonlight SMC Private Limited Peshawar
Messrs Pak Electronics Lahore
Messrs Solar Site (Private) Limited Lahore
Messrs Royal Zone (Private) Limited Lahore
Shell Companies and Financial Irregularities
According to PCA South, the combined valuation of the seven shell companies was merely Rs119 million, a stark contrast to the billions laundered through their accounts. Investigators found that Rs42 billion in cash had been deposited into commercial banks to mask the illicit origins of the funds.
One particularly striking revelation concerned a company that was not even registered with the Securities and Exchange Commission of Pakistan (SECP). Despite this, the unregistered entity managed to import solar panels worth Rs2.5 billion, with its proprietor declaring an annual income of just Rs250,000.
International Links and Duty-Free Exploitation
The investigation uncovered a direct connection between the scam and Chinese companies. The laundered funds were traced to four Chinese companies associated with the same individuals, highlighting international links in the operation. Exploiting Pakistan’s duty-free import policy for solar panels, the perpetrators allegedly conducted dual financial transactions for each consignment—one through the informal Hawala/Hundi system and another via official banking channels.
Role of Banks Under Scrutiny
Commercial banks are also facing scrutiny for their failure to detect and report suspicious transactions linked to these companies, many of which had questionable financial profiles. This negligence further enabled the perpetrators to launder significant sums without raising red flags.
Meticulous Investigation and Legal Action
The operation was spearheaded by DG PCA Chaudhry Zulfiqar Ali and Director PCA South Sheeraz Ahmed. The investigative team cross-referenced data from customs, sales tax, income tax, and banking records to uncover the intricate web of financial and import irregularities.
As a result of these findings, PCA South has registered four FIRs against the individuals and entities involved.
Economic Implications
The scam represents a significant blow to Pakistan’s economy, not only in terms of lost revenue but also in undermining the integrity of duty-free policies designed to promote renewable energy adoption. The scale and sophistication of the operation have raised concerns about systemic vulnerabilities within the financial and regulatory framework.
Looking Ahead
With investigations ongoing, the FBR and PCA South are expected to expand their probe to include additional entities and individuals potentially involved in similar fraudulent activities. Meanwhile, financial regulators and banks are under pressure to strengthen monitoring mechanisms to prevent future abuses of the system.
The unearthing of this scheme has once again highlighted the urgent need for stricter oversight and robust anti-money laundering measures to protect Pakistan’s economy from such large-scale financial crimes.
