Recovery of Illegal Wealth
Making money illegally has become institutionalised. To break that cycle, a concerted effort must be made to recover illegal wealth so that the acquisition of wealth illegally attracts exemplary punishment. Wealth that is not declared is illegal, or whether it be held in one’s own name, relatives, proxies, nominees, dummies, etc or in the name of individuals/groups, business entities, etc. For any wealth declared there has to be a source of income, an income on which commensurate tax must have been paid. For wealth traced out that is not declared, there can be only one rule of law, confiscation by the State without recourse to any caveat. Illegal wealth is usually kept either in a real estate within the country, though abroad it is mostly in numbered accounts or under the cover of offshore companies in UK and elsewhere. After years of fruitlessly chasing after people in the traditional way of searching for assets of the rich who had the money to finance the use of smart tax lawyers and accountants to keep money in safe tax havens, the US Internal Revenue Service (IRS) has now switched over to collecting information about the lifestyle of individuals and calculating tax thereof. This change in modus operandi has made it increasingly difficult for people to enjoy their wealth without coming under the censure of the tax-man. Theoretically this could be possible in Pakistan but our Income Tax Department which has checking of tax evasion as their primary reason for existence has more individuals within the department with illegal wealth than any other commensurate group of individuals, except maybe in comparison officials of Customs and Excise and/or Immigration. Without fear of discovery retribution thereof, the show of wealth is so blatant that one tax man displays at least four “Chughtai” miniatures prominently in his house, each painting worth over Rs.2-3 lacs. Obviously we cannot expect our tax-men to blow the police whistle on themselves or on whom they consider their own (for a price, of course).
There have to be priorities in the chasing of illegal wealth. Illegal wealth must first be classified into (1) mega-wealth, ie. those who have acquired wealth far in excess of their declared income, above US$ 12.5 million (Pak Rs.500 million approximately), (2) super-wealth, between US$ 5-12.5 million (Pak Rs 200 million to Rs.500 million) and maxi-wealth, upto Rs.200 million ie. US$ 5 million. A few are in the super-mega class ie. US$ 1 billion and beyond. Illegal wealth within Pakistan will rarely be in bank accounts or either in one’s own name. It will invariably be held in real-estate, stocks and shares, in industries, etc. A far greater amount is invariably held abroad through various sleight-of-the-hand structuring, however Pakistanis (and Indians and Bangladeshis) tend to keep a substantial amount in banks and other financial institutions in numbered accounts. Many corrupt bureaucrats lost their ill-gotten life-savings when BCCI crashed. Different teams must go after priorities set, within Pakistan and abroad. In Pakistan, the FIA made an excellent headway in tracing out the wealth looted by the cooperatives, finance and investment Companies in the 80s but the poor depositors did not get even a fraction, most went into the pockets of corrupt FIA officials. The lifestyle of our Income Tax, Customs, Excise and Immigration staff can be assessed from the real estate records in the posh areas in Karachi of KDA Schemes 1 and 5, PECHS, Defence, Bath Island, etc. One will find an inordinate amount of property in the names of females and children. How can they justify the type of income that can afford such valued real-estate ?
Accountability, Filipino Style
No one in modern times personified the misuse of public office for acquisition of wealth by illegal means more than late President Ferdinand Marcos and his wife Imelda Marcos. The lasting symbol of that blatant corruption was the 3,000 pairs of shoes owned by Mrs Imelda Marcos which were gawked at by demonstrators (some bare-feet) who broke into the Malacang Palace soon after the Marcos family fled Manila for safer havens. The street power that brought Corazon Aquino to the Presidential chair demanded accountability and one of her first acts as the new President was to issue Executive Order No.1 on Feb 28, 1986 creating the “Presidential Commission on Good Government” (PCGG) to assist her, to, quote “in the recovery of ill-gotten wealth accumulated by President Ferdinand E. Marcos, his immediate family, relations, subordinates and close associates, whether located in the Philippines or abroad, including the take over and sequestration of all business enterprises or entities owned or controlled by them, during his administration, directly or through nominees, by taking undue advantage of their public office and/or using powers, authority, influence or connection or relationship”, unquote. Needless to say, because the Philippines was the very first nation in the Third World to break fresh ground in trying to get the illegal wealth back into the national coffers, as such there were legal loopholes, safeguards, parameters, sensitivities of fairness and due process, etc both in national and international circles. The almost unanimous public demand for immediate accountability needed to have due legal cover and two more Presidential directives, Executive Order No.2 on March 12, 1986 and Executive Order No.14 on May 5, 1986 were issued, making the required explanations and tightening the laws. On March 25, 1986, Presidential Proclamation No.3 Article II Section 1(D) duly ratified by Parliament stated that “the President shall give priority to achieve the mandate of the people to recover ill-gotten properties amassed by the leaders and supporters of the previous regime and protect the interests of the people through orders of sequestration or freezing of assets or accounts”, unquote. The Proclamation stated clearly that “the vital task was the recovery of ill-gotten wealth to help and hasten national economic recovery”, unquote, Philippines having been beggared beyond description by the Marcos-es.
In the mid-80s the international community was still forgiving of despots in Third World countries who not only amassed wealth at the cost of those whom they ruled who also allowed their cronies and relations to run riot at the same time. Imelda Marcos had fantastic PR (Public Relations) among the jet set (“the beautiful people”), people with influence in the corridors of power in most western countries. The cold war not yet being over, the western world still had use for authoritarian regimes which held the line by proxy against communism. The Filipinos did not have a single precedent to help them, yet they went about it expeditiously, cautiously but carefully. Executive Order No.14, a little over two months later, finally put in place the necessary laws to recover the ill-gotten wealth. The laws governing the Commission (PCGG) clearly defined viz (1) who and what was the focus of recovery by the Commission (2) the powers of the Commission (3) it allotted a certain sum (Fifty million Pesos ie. about US$ 4-5 million) for financing of the Commission’s task (4) it spelt out clearly parameters regarding the powers of the Commission (5) it gave out legal cover and immunity to those engaged in the Commission’s work (6) it allowed the Commission to take over and freeze all assets and properties of Marcos, cronies and relatives, etc in whatever form domestically and internationally and not allow disposal till so allowed by the Commission (7) it forbade the disposal, transfer, conveyance, etc of all such assets and properties (8) it commanded those who knew of such assets and properties to report this to the PCGG (9) it allowed the Commission to obtain information from any person, government offices or government agencies (10) to frame and promulgate such rules and regulations as would be necessary to help in the success of the Commission’s work (11) recommend/adopt measures to prevent recurrence of such graft and corruption and (12) appeal to foreign governments in assisting to recover the ill-gotten wealth.