Transparency International alerts Pakistan to over-invoicing of imports

KARACHI: Transparency International Pakistan (TIP) has given a heads-up to the government about over-invoicing of coal imports by Lucky Commodities that however rejected the anticorruption watchdog findings, people familiar with the matter said on Tuesday.

Transparency International Pakistan (TIP) said Lucky Commodities over-invoiced coal imports in connivance with the exporter GCL Dubai. GCL Dubai bought coal from a Singaporean-based trader and was shipped from Indonesia to Karachi directly. GCL Dubai issued invoice around $10/ton higher than GCL Dubai’s purchase price. Moreover, the freight charges were also inflated, according to the TIP letter sent to the Federal Investigation Agency. TIP said the email address provided by GCL Dubai in its agreement with Mercuria Singapore also happens to be of Lucky Commodities – part of business conglomerate Yunus Brothers Group. Lucky Commodities, however, termed the Transparency International claims highly misleading and defamatory.

Lucky’s spokesperson said the entities mentioned in the letter, whether foreign or local, are all registered and disclosed in the records of the Securities and Exchange Commission of Pakistan, State Bank of Pakistan and the Federal Board of Revenue. “All transactions are declared trading activities between the entities and the amounts involved have been duly taxed in Pakistan. Also, the consignments imported have been declared on which duties and taxes have been paid as per the laws of Pakistan. Further, all exchange of funds has been through proper banking channel,” the spokesperson said.

Over-invoicing is the most common trade-based money laundering method, wherein the imported submits an inflated invoice and remits the sum exceeding the value of the shipped goods to the exporter, which usually is an associated company. A customs official said over-invoicing of imported goods was rare in past, but several companies including multi-nationals have been found involved in the practice. TIP has forwarded the complaint to the Federal Investigation Agency regarding the money laundering of hundreds of millions of dollars through over invoicing in coal imports since 2013.

Last year in October, State Bank of Pakistan issued instructions to banks to strengthen their vigilance system to mitigate the risk of money laundering and terrorist financing in the name of import and export activities in the country. “Transferring value through legitimate trade transactions has become increasingly attractive avenue for money launderers and terrorist financing, as they are able to easily obscure their transactions in significant volumes of international trade and escape detection,” the central bank said. “The main methods by which such people transfer value through legitimate trade transactions are under-invoicing, over invoicing, short/over shipment, obfuscation of type of goods/services.”