ISLAMABAD: The Faceless Customs Assessment (FCA) system, inaugurated by the prime minister last year in Karachi to combat corruption, has incurred a revenue loss of about Rs100 billion in three months.
This was revealed in a detailed analysis by the Pakistan Customs Audit — an internal arrangement of the Federal Board of Revenue (FBR) — spanning December 16, 2024 to March 15, 2025.
“The scrutiny of 13,140 goods declarations (GDs) led to detection of several discrepancies in 2,530 GDs that raise serious concerns about quality of assessments, indicating revenue and compliance risks,” said the 161-page report, which did not cover 100 per cent operations.
Of the reviewed GDs, the audit looked into 18 per cent cleared through the green channel, 76 per cent through the red channel, and six per cent through the yellow channel, highlighting weaknesses of the system, inefficiency of the human resource, under/overinvoicing, as well as widespread trade-based money laundering.
In some cases, importers of solar panels imported shipments in 2023 and brought containers for clearance more than a year later, having advance knowledge of the launch of the faceless system.
The audit found duty/tax evasion of Rs5 billion (US$17.6 million) in 1,524 GDs, alongside loss of statutory fines worth Rs2.43 billion, besides clearance of restricted goods valued at Rs10.5 billion in 1,006 GDs, in violation of intellectual property conditions.
Another potential revenue loss of statutory fines worth Rs30.364bn was reported due to non-framing of contravention cases — based solely on GDs involving duty/tax evasions of Rs1 million or more.
The audit also highlighted fiscal fraud involving cancellation of assessed or finalised GDs (involving duty/tax evasions) and fraudulent clearances of solar panel containers on unauthorised tax numbers “involving trade-based money laundering concerns”.
The analysis revealed that by applying the lowest statutory fine slab of 20 per cent, under SRO 499(I)/2009, the total fine worth Rs53.549bn should have been imposed and collected.
“In contrast, only Rs3.480bn was actually imposed/collected…in the 308 cases where contraventions were framed.” Even if cases involving higher duty/tax evasions (worth Rs1 million or above) were considered, the potential revenue loss would still amount to Rs30.364 billion.
The Directorate General of Pakistan Customs said that due to human resource and time constraints, the directorate primarily relied on transactional audits rather than undertaking entity-based scrutiny, which is more comprehensive in identifying revenue-sensitive factors.
Moreover, the directorate restricted its audit scope to those red, yellow and green channel transactions/GDs that involved payment of duty and taxes.
The massive misuse of the system could be gauged from the fact that a Rs10 million worth of used Toyota Land Cruiser was cleared for a valuation of about Rs17,635, revealing an attempt to significantly misdeclare import values.
“The case reflects a serious risk of Trade-Based Money Laundering (TBML). By declaring such a nominal purchase amount, the importer appears to have circumvented financial scrutiny, potentially paying the true cost through unofficial or illicit channels as declared value of vehicle had to be paid through remittances originating from foreign countries.”
In case of failure to substantiate that the actual value of the vehicle was paid through foreign country sources, it can raise concerns with regard to funds transferred through illicit channels involving hawala/hundi — a common hallmark of TBML schemes.
The discrepancies included misclassification of HS Code, misdeclaration of value/non-application of valuation rulings, violations of SROs involving inadmissible concessions/exemptions, short payment of sales tax on retail price etc.
During the post-clearance audit of cancelled GDs, a fiscal fraud phenomenon was detected where assessed/finalised GDs were cancelled and refiled to evade duty/taxes. The modus operandi were such that GDs were filed by misdeclaring descriptions, HS codes, values, etc.
During examination/assessment when adverse findings were reported involving evasion of duty/taxes, instead of making payments, the importers requested the cancellation of GDs which was allowed. After a gap of a few days/weeks, the same importer again filed GD with same misdeclarations, but this time GDs were assessed at lower duty/taxes in favour of the importers. In this manner, the importers managed to evade duty/taxes while also avoiding fines.
The audit also found glaring examples of using vague descriptions, which eventually culminated in lower value assessments. In such cases, at post-clearance stages, it becomes very difficult to detect misdeclaration because primary lapse lies with the department/assessing officer who assessed goods at a lower value, thus shifting the burden of proof to the department to prove any misdeclaration.
It said 54 solar panel containers belonging to five bogus importers were manifested in the year 2023, but fraudulently cleared through 28 GDs between Dec 2024 and Feb 2025, under different/unauthorised National Tax Numbers and Customs User IDs, reflecting exploitation of the FBR’s Registration Module and Customs Computerised System.
Even worse, some of these importers were previously arrested in similar cases and reported themselves as petty employees drawing Rs30,000 in salary. “This forms part of the broader solar panel money laundering scam—already a high-profile case—reflecting a serious systemic lapse”.
The audit highlighted that the increasing quantum of green channel clearances—now covering nearly 60 per cent of imports and 85 per cent of exports—is gradually shrinking the scope of pre-clearance controls.
Additionally, limiting visibility of GD particulars under the FCA undermined pre-clearance assessment quality. The audit observed that modern customs administrations operated on the principle of “front-end facilitation with back-end control”, maintaining an optimal balance between the two is critical.
“In Pakistan Customs’ case, front-end facilitation without proportionate back-end oversight has created a structural lag in the taxation framework, escalating both revenue and compliance risks,” the audit said, adding that the green channel had itself turned into a risk area. - Dawn/ANN
