FOLLOWING the 26th Constitutional Amendment, the criteria for appointing high court judges have been framed under the Judicial Commission of Pakistan (Appointment of Judges) Rules, 2024. This has provided an opportunity to consider appointing judges who have background and expertise in dealing with financial crimes cases, such as money laundering, terrorism financing, tax fraud, and so on.

The Financial Action Task Force (FATF) finally removed Pakistan from its ‘grey list’, under which it closely monitors countries for money laundering and terrorism financing, in 2022 — four years after the country was placed on it. It was a hard-won relief. However, without an effective law enforcement mechanism and criminal justice system, along with measures to ensure adequate judicial supervision when dealing with financial crimes, Pakistan may once again end up being placed on the FATF grey list or facing similar sanctions.

The International Monetary Fund (IMF) has included combating terrorism financing, money laundering and proliferation financing (funding for weapons of mass destruction) in its mandate, while the World Bank has formulated the National Money Laundering/Terrorist Financing Risk Assessment Toolkit. The IMF’s involvement in Pakistan’s debt crisis has also created an urgent need for improved tax collection, which requires the judicature to play a robust role. In April 2024, the IMF asked Pakistan to amend its tax laws to prevent massive fraud and introduce the General Anti-Avoidance Rule by amending the Sales Tax Act of 1990. By December 2024, Pakistan’s perceived risk of default had declined 88 per cent.

Recently, however, the Supreme Court of Pakistan upheld the Lahore High Court’s view in the Taj International (Pvt) Ltd case, that no criminal proceedings are justified if there is no prior assessment of sales tax. While some are appreciating this verdict, others have been critical and of the opinion that both criminal and civil litigation can proceed simultaneously. Critics have worried that the verdict may adversely affect tax collection, while others have regretted that such verdicts and legislation seem to facilitate the rich even though the poor continue to face higher probabilities of incarceration and never-ending litigation. It is recalled, for example, that many individuals were named in the Panama Papers scandal, yet there never was any proper prosecution nor any legislation against offshore companies involved in money laundering. A judge of the LHC named in the Panama Papers simply resigned to save himself from accountability.

In 2024, the IMF asked Pakistan to amend its tax laws to prevent massive fraud.

In a separate case, the Federal Investigation Agency, after registering a case against the Sarim Burney Welfare Trust for child trafficking, also decided to register a case for money laundering after obtaining relevant evidence. This suggests linkages between predicate offences like human trafficking and the larger crime of money laundering. Likewise, a leaked internal report from the Sindh Food Department stated that from 2022 to 2024, around 4,000 tonnes of wheat were stolen in connivance with officials of the department. An effective criminal justice system can help prevent such cases, provide protection against financial fraud, create conducive conditions for foreign direct investment, instil confidence in the business community, and allow effective checks over private and public companies committing tax fraud, money laundering and similar crimes.

‘Green’ crimes are directly linked to corporate crimes: private and public companies can cause widespread and long-lasting environmental destruction without being held acc­ountable for it. The 1984 Union Carbi­­de disaster in Bho­pal, India, and the 1986 Chernobyl Power Plant meltdown are cases in point. A parliamentary panel placed responsibility on government and private operators of the Tokyo Electric Power Company for the 2011 Fukushima nuclear plant accident in Japan, instead of solely blaming the tsunami that caused it. Meanwhile, a private company has wasted billions of litres of water in Pakistan but has never been held accountable. Judges from the district judiciary ought to be specially trained for such cases so they can be properly utilised when they are eligible for elevation to the high courts.

Pakistan has amended several laws, especially the Anti-Money Laundering Act of 2010 and the Anti-Terrorism Act of 1997, to meet FATF’s criteria. However, the courts must now be equipped to deal with cases of financial crimes. Both the high courts and the Supreme Court need special benches to hear such cases, and they can start by appointing specialist judges who are able to deal with them.

The writer is an advocate at the Sindh High Court and faculty at the Department of International Relations, University of Karachi.

Published in Dawn, January 7th, 2025