Money Laundering is a curse that impacts the global economy. The United Nations in its report estimated that the amount of criminal proceeds laundered annually amounts to between 2% and 5% of global GDP or $1.6 to $4.0 trillion USD per year. However, efforts are being made to combat this issue since many years. In 1989 the G7 formed the intergovernmental organization Financial Actions Task Force (commonly known as FATF) as an International organization to draft policies and regulations to combat money laundering and to fight terrorist financing. In 2004 the IMF and then the World Bank colligated with FATF by initiating Financial Sector Assessment Program (FSAP).
However, the urgency for a global campaign against money laundering became a high-profile public issue in 2016 when the International consortium of Investigative Journalist (ICIJ) uncovered around 11.5 million secret legal documents that became known as the ‘Panama Papers.’ The documents contained information on more than 214,488 offshore entities. This disclosure exposed well-known celebrities and many government officials’ money laundering schemes from around the world through offshore havens triggering the need for tougher universal regulations to fight against money laundering.
The Panama Papers leaked offshore companies belonging to more than 450 Pakistani individuals and included information about Sharif family who was ruling the country at that time. This leak gave new life to the allegations of corruption against Sharif family. Opposition parties demanded an investigation of alleged money laundering on the part of the Sharif family. Pakistan’s current ruling party Pakistan Tehreek-i-Insaf (PTI), staged country-wide protests and its leader Imran Khan stated “The leaks are God-sent”. The PTI leader demanded that the Chief Justice of Pakistan lead a commission to investigate corruption and money laundering allegations against the Ruling Party chief and prime minister of Pakistan, Mian Muhammad Nawaz Sharif. A petition was filed to investigate these allegations. Initially, the Supreme Court rejected the petition citing a lack of jurisdiction; however in November 2016, the Supreme Court accepted the new petition based on accusations of acquisitions of properties and businesses utilizing ‘illicit funds.’ Later, they constituted the bench to adjudicate this highly polarizing case.
https://www.youtube.com/watch?v=3B6LiFygr-k
Background to Panama case against Nawaz Sharif and his family
To understand the background of this case, it is pertinent to highlight several key facts.
First, Pakistan obtained membership in the Asia Pacific Group in 2000. As a member of the APG, Pakistan was required to develop, introduce and implement laws and regulations to combat money laundering and terrorist financing based on international standards.
Second, Pakistan didn’t introduced its first legislation on money laundering until September, 2007, only after the deadline issued by an AGP team during their visit to Pakistan in July 2007 to investigate why Money Laundering Laws had not been implemented. Interestingly, the long awaited Ordinance (ALMO 2007) on money laundering was still not in compliance with the requirements of international standards governing offences such as smuggling, racketeering, trafficking in persons, sexual exploitation, arms trafficking, and environmental crime; all predicate offences. It is interesting to note that under AMLO 2007, the concealment of criminal proceeds was termed an offence but the transfer of legitimate money to promote criminal activity was notmade part of any offence. FATF objected to this Ordinance as it lacked the requirements of the Vienna and Palermo Conventions.
Third, a US State Department report highlighted that Pakistan’s Financial Monitoring Unit (FMU), which monitors suspicious activities, lacks a central repository and also gives protection from liability for reporting. The US Report further highlights that from July 2006 through June 2007, different banks reported 22 transactions but only five referred to law enforcement agencies for investigations. Eventually, Pakistan repealed AMLO 2007 and introduced the Anti-Money Laundering Act, 2010 to overcome the weaknesses highlighted by the FATF.
https://www.youtube.com/watch?v=RYLM16C0rMc
Fourth, prior to 2007, there were no laws in Pakistan to monitor money laundering. Similarly, there was no mechanism available in Pakistan until June 2004 to monitor remittances made through alternative remittance systems; especially through unregistered moneychangers. People were free to utilize the traditional banks or an unregistered alternative remittance system. Since there were no Government rules or mechanisms to regulate this activity, it was not considered a crime. After the Panama Papers were exposed, opposition parties demanded a money laundering investigation of Sharif family and their transactions performed back in 1970s and 80s.
Although there were no money laundering laws in effect at that time, the Sharif family was forced to produce and explain the money trail for their transactions originating from the UAE to Qatar that occurred in the late 70s and early 80s.
In their defense, the Sharif family provided: a letter from Sheikh Hamad bin Jassim bin Jaber Al Thani, an affidavit of Tariq Shafi, the purchase agreement of the Azizia Steel Plant, and a copy of the settlement of investment made by the late Mian Muhammad Sharif. Counsel for the Sharif family explained the transaction settlement to the Supreme Court and submitted before the bench that the properties and businesses under question were purchased from the sale proceeds from Gulf Steel. A portion of those proceeds, around 12 Million UAE dirham were placed with Sheikh Jassim bin Jaber Al Thani. The affidavit from Mr. Tariq Shafi described transferring over the 12 Million UAE Dirham to Fahad bin Jassim bin Jaber Al Thani. The honorable judges then questioned how this large amount was transferred? Legal counsel explained that this amount was delivered in cash. Instead of asking about the legitimacy of cash transactions and cross boarder currency restrictions in place at that time, one honorable judge made fun of the transactions and asked if the money was transferred by the camels from Dubai to Qatar.
Was the Sharif family obligated to retain and provide records of these transactions 30 years later? Did the Supreme Court confirm that there were currency restrictions during that time period regarding the movements of funds or existing laws that would legally obligate the Sharif family to use a traditional banking channel? The simple answer was “No.”
The Sharif transactions in question involved two countries; funds originated in the United Arab Emirates and were remitted in Qatar. When did applicable AML regulations first become effective in these countries? We know that for the first time in 2000, the United Arab Emirates introduced initial AML regulations under Circular 24/2000. Furthermore, the Dubai Financial Services Authority Module (DFSA) didn’t become effective until 2004, which was later revised in 2013 and named the Anti- Money Laundering, Counter Financing and Sanction Module (DFSA AML Rules). The UAE Security Commodity Authority (SCA) issued its Anti- Money Laundering and Terrorism Finance Combating Procedure in March 2010.
https://www.youtube.com/watch?v=QbUb7kuDENU
So officially there was no regulation to monitor money laundering related issues at that time and the UAE was known as a third limb in Hawala Trio (after Pakistan and India), and it was considered key point in the global hawala network due to the large presence of expatriate workers and businesses. After the 9/11 tragedy due to the growing international pressure, the UAE hosted its first international conference on the Hawala system to regulate this industry. However, in Qatar where funds were remitted by the Sharif family, they still had a cash intensive economy without mandatory cross-border currency reporting requirements. Only in suspicious cases, did custom officials require travelers to fill out a form declaring cash, currency, or negotiable instruments in their possession. In 2010, Qatar introduced “The Combating Money Laundering and Terrorism Financing Law No. 4 with The Anti-Money Laundering and Terrorist Financing Rules 2010 which were later amended in 2015.
Therefore, in the absence of any governing regulations or currency restrictions at that time, the Sharif family’s freedom to choose alternative means for remittances did not amount to illegal activity or money laundering.
However, whilst passing its order, the Supreme Court ignored the absence of prevailing law and the means through which funds were generated and remitted to Qatar. In money laundering investigations, the source of funds and purpose of the funds matter. The Sharif family provided the source of funds including the purpose of its transfer and their investment details. Today, the mode of payment is more highly regulated. However, back in 70s and 80s there were no currency restrictions or regulations, except in traditional banking channels, and alternative remittance systems were operating and widely utilized. In this case, asking the Sharif family to provide proof of banking transactions shows that the purpose was not to provide justice but to punish the defendant.
Furthermore, a Joint Investigation Team (JIT) constituted by the Supreme Court performed a detailed investigation but failed to establish any nexus that these funds were generated through illegal means. Despite knowing all the facts and legitimacy of the source and purpose of these funds, the Supreme Court bench, headed by the current Chief Justice of Pakistan Mr. Asif Saeed Khosa, ordered to file reference in NAB Court against the Sharif family.
https://www.youtube.com/watch?v=fuSCgvZgdy0
Were judgments against and the conviction of Sharifs just?
According to the decision reached in the constitutional Petition 3258 of 2017, entitled National Accountability Bureau (NAB) vs M/s Hudaibya Paper Mill Limited, the court held that “Money Laundering was made an offence in Pakistan when the Anti-Money Laundering Ordinance was enacted on September, 7, 2007.” The Court further observed that “There is another aspect to consider. The term money laundering, as defined in the said Ordinance and then Anti-Money Laundering Act, 2010, state that it emanates from the proceeds of crime”. Importantly, the NAB didn’t allege that the monies held in the foreign currency accounts are proceeds of crime.” This judgment clearly shows that you cannot punish someone in the absence of regulations. But in Sharif family case, all rules and regulations were brushed aside, and Supreme Court not only ordered National Accountability Bureau to file a reference against Sharif family but it also disqualified the prime minster on the basis of a receivable salaryfrom a company that had already closed its operations.
The Supreme Court in judgement held that “a salary not withdrawn would nevertheless be receivable and as such would constitute an asset for all legal and practical purposes. When it is an asset for all legal and practical purposes, it was required to be disclosed.” While deciding this outcome, the Court relied on the definition of an assets defined in Black’s law dictionary. However, receivable salary will not be considered a salary unless received. Supreme Court bench misinterpreted the definition of assets as well. It is a cardinal principle that language of a statute is authoritative in the matter before the court over any other means.
Evidently, the Supreme Court ignored the definition given in section 12 of the Income Tax Ordinance, 2001 which clearly states that “Salary means any amount received by an employee from any employment, whether of a revenue or capital nature.” In the Nawaz Sharif case, salary was never received and the said company had even closed its business. If we apply accounting principles here as well, then the salary was in essence bad debt in nature, which was already written-off and does not require reporting to any authority. Additionally, as per section 132 of the income Tax Ordinance, 2001 individuals are not obliged to report their accrued incomes. So any amount which had already been written off and where the payee is no longer existed cannot be termed as an asset, both in legal and accounting terms. Furthermore, when a statement of assets and liabilities is filed by the elected representative, per-se it is filed on a cash basis, not the accrual basis of accounting negating the concept of receivables and payables.
Throughout the case proceedings, the Supreme Court ignored the basic principles of justice; the judge’s ‘camel’ remarks were more mockery than insight into the law.
While passing its first order, the court referred to and relied upon novels and electronic media, apparently to tarnish the image of then prime minister. In its second order dated July 28, 2017, in the same Panama case, the Supreme Court bench ignored the prevailing law and even universal accounting principles and relied on the dictionary meanings and termed a receivable salary from already dissolved company as an asset.
Additionally, the constitution of JIT was also controversial; on one hand due to ‘WhatsApp calls’ and also because its members were political opponents of the Sharif family. While dealing with the objections of the Sharif family, the Supreme Court moved forward with the same JIT team. The JIT’s investigation violated the powers conferred under section 21(g) of NAB ordinance, 1999 in obtaining the documents against Sharif family. None of the documents presented in the court met the mandatory requirements in law of evidence prevailing in Pakistan.
Later, some of the most important criteria used by the Supreme Court of Pakistan to convict Mr. Nawaz Sharif was not entertained in different cases by these same judges. Examples include: Sheikh Rasheed vs. Shakeel Awan, and Hanif Abbasi vs. Imran Ahmed Niazi. In the Hanif Abbasi vs Imran Niazi case, the Supreme Court accepted the money trail explanation despite Niazi’s backtracking from his initial declarations multiple times regarding Niazi Services, legal fees and income earned through playing county cricket. Submissions included a dubious letter of remittances detail from Rashid Ali Khan, which contradicted Niazi’s previously submitted income tax returns.
Ultimately, the National Accountability Court also ignored the facts found during the NAB and JIT investigations. These investigations were launched to prove that the sources of Sharif’s funds were illegitimate and to prove that he owned various properties and businesses that he did not disclose but beneficially owned.
https://www.youtube.com/watch?v=trpPSyJWhYE
In the end, these investigations did not find any supporting evidence to prove either allegation. Yet they still sentenced Sharif for ten and seven year’s respectively in two separate cases.
Thereafter, a video surfaced of Judge Arshad Malik, who sentenced Mian Muhammad Nawaz Sharif for seven years, admitting on record that he was blackmailed and coerced into writing the judgment and sentencing Mr. Sharif. The video of the judge has been tested forensically and proven authentic in its contents. Based on this video, the apex Supreme Court revisited the matter but decided to refer it to Islamabad High Court for final disposition. At that time they also decreed that High Court follow the conditions set out in their judgement regarding the authenticity of the video. Prior to this hearing, the court did not issue any notices to parties involved and only heard from the petitioner and Attorney General. These entire proceedings bypassed the basic principles of open and fair adjudication.
An unequal application of justice raises serious questions about the integrity of our judicial system.
Recent precedents set by the judiciary are worrying. Apart from Panama Case, the removal of Justice Shaukat Siddiqui, the disqualification of PMLN candidates both in senate and NA, the Supreme Court ruling against the Election act, 2017, the imposition of unnecessary conditions for bail, the ruling on the blackmail video scandal of Judge Arshad Malik, and the opinion on reference against Qazi Faiz Isa are all recent examples.
In the end, the people of Pakistan will pay an enormous price unless they enjoy a truly independent and impartial judiciary.
https://www.youtube.com/watch?v=XDihA95GmRY&t=5s