Supervisory committee formed to monitor action against officials accused of failing to detect over-invoicing, trade-based money laundering

Pakistan has assured the International Monetary Fund (IMF) that it will strengthen interagency data sharing and monitoring mechanisms to curb trade-based money laundering following revelations that nearly ₨70 billion was allegedly laundered through over-invoiced solar panel imports, The Express Tribune reported. 

Prime Minister Shehbaz Sharif has constituted a supervisory committee to oversee disciplinary proceedings against officials accused of failing to detect and prevent the alleged money-laundering scheme. 

The committee was formed after an inquiry report concluded that the solar panel import case exposed systemic weaknesses, lack of coordination and administrative failures across multiple government institutions.

According to previously published data cited in the report, around 6,232 import documents were allegedly over-invoiced between 2017 and 2022, resulting in approximately ₨69.5 billion being transferred out of Pakistan through trade-based money laundering.

The inquiry report stated that launderers used over-invoicing of imports and under-invoicing of exports to move funds abroad while exploiting gaps in oversight and enforcement mechanisms.

Under commitments made during the third staff-level agreement with the IMF, Pakistan assured the lender that authorities would improve coordination on foreign currency reporting, customs data and transactional monitoring to better identify trade-based money laundering risks.

The government also informed the IMF that the Financial Monitoring Unit would continue sharing financial intelligence with relevant agencies, particularly through coordination with customs authorities.

However, the inquiry report criticised several institutions for weak oversight and ineffective enforcement. It stated that the Financial Monitoring Unit failed to carry out effective transaction analysis, while the Securities and Exchange Commission of Pakistan allegedly registered shell companies with minimal capital and failed to identify money laundering risks.

The report also found that the State Bank of Pakistan carried out ineffective inspections of banks despite detailed anti-money laundering regulations and only acted after intervention by the Senate Standing Committee on Finance.

According to the findings, commercial banks processed over-invoiced import payments between 2017 and 2022 without conducting effective post-audits or compliance checks, enabling criminal elements to transfer billions of rupees abroad.

The inquiry committee recommended disciplinary and criminal proceedings against officials of commercial banks, the FMU, SECP, Inland Revenue Service, Customs and anti-money laundering agencies accused of negligence or facilitation.

It also proposed that the State Bank strengthen compliance monitoring through automated and real-time tools, conduct internal audits of enforcement units and introduce accountability mechanisms for repeated banking sector violations.

Officials said Pakistan also assured the IMF that reforms under the updated National Risk Assessment framework would focus on improving anti-money laundering supervision, beneficial ownership records and suspicious transaction reporting, particularly in sectors such as real estate and designated non-financial businesses.

The supervisory committee, headed by Establishment Division Secretary Barrister Nabeel Awan, will review disciplinary proceedings, identify additional officials potentially linked to administrative failures and submit fortnightly progress reports to the Prime Minister’s Office.