Customs officers grapple with each others over fraudulent import scam worth $1.4bn

ISLAMABAD: Customs officers are reportedly grappling with each other’s over fraudulent imports scam worth $1.4 billion.

Sources said that Syed Shakeel Shah has recused himself from notified fact finding inquiry regarding issues related to financial instrument functionality. 

The new members of committee would be Chief Collector Appraisement (South) Karachi Ashhad Jwad, Collector of Customs Appraisement (East) Sanaullah Abro and Collector Islamabad Naveed Elahi.

Sources claimed that most of the imported goods cleared under the jurisdiction of Appraisement South and East Karachi and now FBR notified a committee consisting of Chief collector as well as Collector Appraisement South and East for conducting inquiry of fraudulent matters which is clear conflict of interest.

Sources said that the director of Reform and Automation has also requested the FBR to include representatives of SBP and Directorate of customs intelligence in this committee.

The subject fraudulent clearances of imported goods made without meeting mandatory requirements of PSW financial instruments involved illegal transfer of funds out of Pakistan violating Anti-money laundering Act, 2010 (as amended) and section 32, 32A & 32C of the Customs Act, I 969, therefore, include Directorate General of Intelligence & Investigation, Customs, Islamabad being the lead Anti-money Laundering Customs Agency and representative of SBP in this fact finding inquiry related to financial functionality, sources added.

Recently, Pakistan Customs as well as PSW officials held discussion over PSW’s Financial Instrument.

It also revealed in the meeting that traders/importers have tried to clear GDs on unauthorized Open Accounts however the PSW team claimed that there were technical errors in the WeBOC system and we immediately alerted the WeBOC team which detected and fixed the issue on 01.02.23.    

PSW has taken the immediate cognizance and the issue was escalated to the concerned regulator i.e. the State Bank of Pakistan (SBP) and shared with the relevant Authorized Dealers (Commercial Banks) as per directions of SBP along with clearance data for scrutiny and further necessary action under the relevant banking laws and regulations. 

On the other hand, Customs officials said that we have not been consulted on unauthorized Open Accounts. Neither the PSW shared the inquiry report nor identified delinquent importers involved in fraudulent clearance of imported goods without meeting mandatory requirements of PSW financial instruments, sources added.

Even PSW failed to report and share this information with the Clearance Collectorate for taking legal action as warranted under the section 32,32A & 32C of the Customs Act, 1969 and other relevant laws, Customs officials informed the PSW.

Sources said that the Directorate of Reforms & Automation, Karachi also informed the officials of PSW that the directorate has relied upon GD clearance data of importers with respect to “Open Account” during the period from 07-12-2021 to 26-06-2023.

PSW’s Financial Instrument has not been tagged around 52,538 numbers of GDs involving $1.478 billion, sources added.

Similarly, PSW’s Financial Instrument has also not been tagged for more than one year on 9,680 numbers of GDs involving $3.26 million.

The directorate of R&A informed the PSW that State Bank of Pakistan’s Foreign Exchange Manual only allows import of spare parts, raw materials by manufacturing and industrial concerns and commercial importers, Life saving medicines and devices, aircraft related spare parts/components, lab equipment, instruments imported by’ educational Institutions for their own use, news papers, magazines, periodicals, hooks etc.

Whereas under “Open Account” the Authorized dealers (commercial banks) allowed open account facility to importers in violation of Para 17 (ii) of Chapter l3 of Foreign Exchange manual, sources added.

The Customs officials further informed that the PSW bank integration system was not developed in consultation with the Directorate of Reform and Automation but rather development was conducted in isolation by PSW.

In addition, PSW officials have a point of view that multiple goods declarations cannot be filed under a single financial instrument is prima facie wrong and contrary to the applicable regulations and business practices.

Whereas, Customs officials partially agreed that a single financial instrument can be attached with multiple import GDs. However, it is reiterated that certain importers of solar panels were involved in mis declaration of unit invoice value on exorbitantly lower side as compared to declared value by the importers and by doing so, they were misusing single FI repeatedly practices against multiple GDs.

In the case of solar panels, PSW Financial instrument’s involving approx. $26 million were used unlawfully. In these cases, the unit declared value exceeded the unit invoice value by more than 250.

Member Customs Operations Told this scribe that the issue was discovered by the Clearance Collectorate themselves & they also initiated action against such importers. 

They also reported it to Director Reform & Automation, Karachi for creating additional checks in the system. So those who discovered the issue & initiated action have nothing to conceal.