In its annual report titled 'National Strategic Assessment of Serious and Organised Crime 2018' published on the 13th of May, the National Crime Agency (NCA) has identified Pakistan among the top three source countries for money laundering in the United Kingdom through PEPs investment. Other developing countries are also at a risk of losing millions of dollars in foreign exchange owing to widespread 'Trade based money laundering' (TBML).
The report notes, “The UK is a prime destination for foreign corrupt PEPs to launder the proceeds of corruption. Investment in UK property, particularly in London, continues to be an attractive mechanism to launder funds. The true scale of PEPs investment in the UK is not known, however the source countries that are most commonly seen are Russia, Nigeria and Pakistan”.
The report also states: “The overseas jurisdictions that have the most enduring impact on the UK across the majority of the different money laundering threats are: Russia, China, Hong Kong, Pakistan, and the United Arab Emirates (UAE). Some of these jurisdictions have large financial sectors which also make them attractive as destinations or transit points for the proceeds of crime”.
The report warns that “a small number of UK-based professional enablers (solicitors, accountants, estate agents and trust and company service providers) continue to assist corrupt PEPs to invest in the UK. In the majority of instances professional enablers are complicit although some may be unwitting or negligent”.
Trade based money laundering (TBML), such as Trade misinvoicing, is another key method of money laundering impacting the UK.One of the ways in which this happens is by moving money illicitly across borders which involves the deliberate falsification of the value or volume of an international commercial transaction of goods or services by at least one party to the transaction. For example, imports of goods worth USD 1 million to Pakistan are misinvoiced (overinvoiced) at USD 1.5 million through an offshore middleman and the difference remains in an overseas account. The result will be that Pakistan will end up losing another USD 500,000 in foreign exchange. Meanwhile, the Pakistani traders and the officials facilitating misinvoicing together pocket USD 1 million or 50% on the two trades. Pakistan’s trade and current account deficits grow and the foreign exchange reserves are depleted, ensuring that Pakistan is forced to go back to the International Monetary Fund (IMF) for yet another bailout with unfavourable, tough conditions. Such multi-trillion dollar massive net outflows of money from the developing to the wealthy countries has been documented by the US-based Global Financial Integrity (GFI), and has been “aid in reverse”.
