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Articles How to Prevent Financial Fraud in your Organization, 11, 12 President Communication, By: FA Barrister Sohail Nawaz - President IFAP, 4, 5 Recognizing the Elements of Fraud, By: FA Barrister Umer Abdullah - Member Executive Council IFAP, 6-11 Top Corporate Governance Stories of 2011, 12, 13
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IFAP About, 74 Executive Council / Board of Directors, 75 MoUs /Reciprocal Arrangements, 73 Objectives, 74 Recent / New Members, 73
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News International News ACCA News, 71, 72 ACFE News, 48-54 AICPA News, 66-68 AML & Financial Crime News, 54, 55 CIMA News, 72, 73 FASB News, 65, 66 ICAEW News, 68-71 IFAC News, 61, 62 IFAP News, 73
IFRS News, 62-65 Serious Fraud Office (SFO NZ) News, 59-61 Serious Fraud Office (SFO UK) News, 57-59 Transparency International News, 55, 56 National News FBR News, 32, 33 Fraud & Corruption News, 13-28 NAB News, 39-41 SBP News, 34-39 SECP News, 28-32 Transparency International Pakistan News, 41-48
President Communication
Dear Professional Colleagues,
"There's no question that the Enrons and WorldComs of the world have heightened the need for better governance, and that momentum has carried all over the globe." The fast-changing world of information technology and the exponential increase in the use of computer systems threaten the forensic auditing fraternity. The technology used by criminals and fraudsters is changing constantly and forensic auditors need to stay on top of their game to prevent and detect these crimes. Through the growth of the Internet and connectivity technology, the world is faced with opportunities for crime and fraud that were not available before. Forensic auditing techniques need to evolve just as fast as the techniques used by hackers and criminals. This can be done by employing former hackers to write security tools to aid Forensic Accountants/Auditors. One caveat, though, is that these security tools should not be exploitable by hackers and fraudsters to aid them to commit their crimes. Employees and ex-employees with a thorough knowledge of the computer systems of an organization can pose a significant risk to the security of the system. By changing access control procedures after an employee has left the organization, the threat of an external attack by the former employee can be minimized. Surprise audits can assist to control the risk of current employees perpetrating fraud. A risk assessment can also help to reduce the likelihood of fraud. Prosecuting computer crime and computer-based fraud is becoming increasingly difficult to accomplish. Reforms in laws and statutes of specific countries, as well as extradition laws and international cooperation, are necessary to bring computer criminals to justice. The rate at which the law is adapted to accommodate computer crime needs to be increased if such crimes are to be prosecuted successfully. Case law can help to expedite these reforms. The law and the courts are not evolving fast enough to deal with computer crimes. New laws and statutes regarding information technology often take a long time to prove useful. The law needs to evolve alongside forensic investigations to successfully transform and allow for the change in technology and the way business is conducted in the world. The education of law enforcement, legislators and the judiciary in computer literacy will also ease the task of prosecuting computer criminals. The forensic auditor is only as good as the follow-through with successful litigation. Responsibility for preventing and detecting fraud rest with management entities. Although the Forensic Accountant/Auditor is not and cannot be held responsible for preventing fraud and errors, in your work, he can have a positive role in preventing fraud and errors by deterring their occurrence. The Forensic Accountant/Auditor should plan and perform the audit with an attitude of professional skepticism, recognizing that condition or events may be found that indicate that fraud or error may exist. Based on the audit risk assessment, Forensic Accountant/Auditor should develop programs to audit procedures by which to obtain reasonable assurance that the financial statements in their entirety, all significant errors and fraud have been identified. It is expected that the Forensic Accountant/Auditor to implement procedures that will lead to the discovery of errors or fraud without significant impact on the financial statements can not be held responsible for undetected such irregularities. The Forensic Accountant/Auditor should communicate with the management of his client. He should ask the management information concerning any significant fraud or error has been detected in order to detect key problems that could lead to certain activities, the implementation of audit procedures more than usual However the Forensic Accountant/Auditor faces the risk inevitable that some significant errors to be detected, even if the audit is planned and done properly. With trillions of dollars in capital sailing the globe in search of investments, the shareholders' crusade for more open, well-run companies is gaining strength across many major and emerging markets. In what some call a worldwide corporate-governance movement, shareholders are pushing for stronger corporate-governance laws, teaming with investors from different countries and negotiating behind the scenes with businesses. In earlier years, it was hard for shareholders to dig up details from thousands of
global companies on their finances, their directors, executives' pay packages and other information critical to making investment moves. Directors, regulators and shareholders, but also policymakers and the general public, need to pay more attention to corporate governance. This tells us how firms operate, their motives and principles, their reporting lines, who they are accountable to, and how they manage profit, remuneration and, in the case of many financial firms, other people's money. When times were good, too many people took their eye off the ball and now we see the consequences. The public outcry has been loud and understandable, not least in relation to executive pay. And even some top executives have now admitted the lack of relationship between pay and performance and called for a salaries shake-up. We now realize that constantly rising share prices is not necessarily a sign of good corporate governance. In fact, as recent history shows, it could actually be the opposite. Forensic accountancy is often no more than presentation of financial issues in a form that is easily understood by disputing parties. This includes the police or other regulators, the lawyers, the Judge and the Jury. Complexity of financial accounts is often cited as a red flag of fraud. Complex group structures with inter-company transactions and charges often cloud the simple facts of the business taking place. Sometimes the reason is to cover up fraud, but often it can simply be the policy of the company owners structuring their business innocently. Many businesses will use a different bank account for each strand of their business operation, often having several accounts for each company. Then they might have several companies to act as vehicles for different aspects of their activities. Thus one business may run with one company and one bank account, whereas a similar business may have dozens of bank accounts and a straggling group of companies. The complexity of the group might mean that if a dispute arose, forensic accounting would be needed to break things down to a simple level and present almost as if the business was like the single company. Many solicitors working in all areas of the law routinely use Forensic Accountants (FAs) to assist them with the financial and business aspects of a case. However, some solicitors may be faced with the need to instruct an expert accountant for the first time, or must explain to a particularly demanding client why there is a need to spend additional money on appointing another person to the team! Victims of fraud may wonder if spending more money investigating their loss is worth it. This examines why forensic accountancy adds value to any fraud matter, business crime defense or confiscation proceedings. Any criminal or civil dispute involving fraud, money laundering or matters of finance generally tend to be more complex than other disputes. The reason why loss has occurred is often due to the confusing nature of money transactions hiding somebodys attempts to steal. Sometimes business losses are targeted by the regulators as frauds simply because the money trail is confusing! In short, there are many instances where it is essential that a clear and succinct picture is drawn up of any particular transaction, or series of transactions, so that a complete understanding is facilitated for all parties, many of whom do not have a clear or detailed understanding of finance issues. Financial crimes threaten your organization at multiple points of vulnerability. Focusing on a single channel or line of business can hinder management visibility and allow fraud and money laundering to go undetected. A single, holistic management framework that integrates disparate detection systems with alert and case management can automate crime prevention, helping to protect your organization from the financial and reputational loss associated with financial crimes. Leveraging detection systems for both fraud prevention and detection and anti-money laundering (AML) processes helps reduce risk and improve analyst efficiency. Financial services organizations that undertake a comprehensive, structured approach to the prevention and detection of fraud and financial crime can obtain benefits that contribute to higher performance as well as reductions in fraud loss. Activities aimed at improving data quality can support better business intelligence, while standardization of processes throughout the organization improves financial services organizations overall processing efficiency. FA Barrister Sohail Nawaz President IFAP January 31, 2012
Fraud can be for the benefit and gain of an individual, or for the benefit and gain of an organizational entity or program. When an individual commits fraud, the benefits and gains may be direct (receipt of money or property), or indirect (reward of promotions, bonuses, power and influence). When an organization (actually an employee acting on behalf of the organization) commits fraud, the benefits and gains to the organization are usually direct, in the form of financial gain. Some states have specific fraud statutes. Other states may have specific laws to deal with bribery and corruption; and may prosecute other types of fraud under larceny, robbery, embezzlement or other specific statutes. Whenever the U.S.A government is injured through fraud, the matter falls within the jurisdiction of the US Justice Department and the federal courts. Therefore, a fraud could be prosecuted as a felony under both state and federal laws. In addition, under U.S.A federal Law, anyone who engages in fraudulent activity and uses telephones, telegraph and/or the Postal Service to discuss or either send or receive correspondence or documents in furtherance of the fraud, can be prosecuted for felony mail fraud and/or wire fraud; and if two or more persons act in collusion to defraud, U.S.A federal conspiracy statutes also apply. Also, under U.S. federal law, anyone who has knowledge that a felony fraud has actually been committed against the U.S.A government; fails to report the fraud to appropriate authorities; and helps to conceal the fraud by giving false information, concealing facts, obstructing justice, or taking some other positive action, is also guilty of a felony crime punishable by up to three years in federal prison. In addition to the general laws governing fraud, there are U.S.A laws that deal with and/or regulate specific industries and business transactions. These laws also usually contain specific statutes for prosecuting fraud. Some examples would be statutes pertaining to bank fraud, forgery or insurance fraud. Generally, there are twelve crimes that fall under the umbrella of Fraud.
1. Bribery
Bribery is the giving, receiving, offering, or soliciting of any "thing of value" in order to influence an official in the performance of, or failure to perform, the lawful duties of that official. This includes influencing or
soliciting the commission, or collusion to commit, any other type of fraud; or influencing an official, or soliciting by an official, to do, or omit to do, any act that violates the lawful duty of that official. Bribery defrauds the victim (usually an organization or political entity) of the right to honest and loyal services from those employed by the victim.
2. Commercial Bribery
Commercial bribery is the giving, receiving, offering or soliciting of any "thing of value" in order to influence a business decision without the victim's (usually a business organization's) knowledge or consent.
3. Illegal Gratuity
An illegal gratuity is the giving, receiving, offering or soliciting, after the fact, of any "thing of value" for or because of an official act that has been taken. Following are examples of bribery and illegal gratuities: A government inspector solicits payment from the owner of a business regulated by a government agency. In return, the inspector fails to report important safety and financial violations discovered during the last inspection. In this situation, the victims are those who rely upon the honest reporting of deficiencies, and the loss is salary paid to the inspector for work not performed, plus any damages that result from failure to perform. The owner of a company doing business under contract for an organization knows that the manager responsible for overseeing the contractor's activities plays an influential role in deciding whether or not the contractor is satisfactorily meeting the performance terms and conditions of the contract. The manager uses personal influence and position to assure that the contractor receives satisfactory performance evaluations and is paid, even though the contractor's work is substandard, and lower level staff in the organization have legitimate concerns about the cost of the contract and the contractor's ability to perform. The contractor secretly gives financial and other incentives to the manager in return. In this situation, the victims are those who expect satisfactory performance of contract terms. The loss is dollars paid for unsatisfactory work. A senior organization official accepts financial and other incentives from a contractor to assure that a request for proposals is written in such a way that only that one contractor will be able to submit a satisfactory bid proposal. In addition, the senior official uses personal influence and position to persuade other senior officials that a good faith effort to obtain competitive bids has been made. As a result, the favored contractor wins the bid award at a noncompetitive price. In addition, once the contract is in effect, the same senior official approves and justifies several high cost contract amendments, for which additional illegal gratuities are received. In this situation, the victims are those who expect a fair and impartial competitive procurement process. The loss is dollars needlessly spent as a result of noncompetitive pricing and price gouging.
4. Conflict of Interest
A conflict of interest occurs when a person or organization acts on behalf of another individual or organization; and has, or appears to have, a hidden bias or self-interest in the activity undertaken; and the hidden bias or self-interest is actually or potentially adverse to the interests of the individual or organization being represented; and the hidden bias or self-interest is not made known to the individual or organization being represented. When a person's conflict of interest results in economic or financial loss to the individual or organization on whose behalf the person is acting, then fraud has occurred. Conflict of interest can exist on its own, or can be an intricate part of other frauds such as bribery and illegal gratuities. Conflict of interest laws apply to government employees and those doing business with government. In the non-public sector,
conflict of interest may not be a prosecutable offense, although the criminal results of such conflict would be. The examples given for bribery and illegal gratuities are also examples of conflict of interest resulting in fraud. Conflict of interest can also occur and result in fraud without the presence of bribery and illegal gratuities. This happens when an individual or organization acting on behalf of another individual or organization has a hidden financial interest in the outcome of an event or transaction.
The typical example is that of a company official or employee, or an immediate relative of an official or employee, who has a hidden financial interest (stock or direct ownership) in a vendor doing business with the company. If the official or employee is in a position to influence the amount of business the vendor does with the company, then a conflict of interest exists. If that conflict of interest results in unnecessary orders being filled or paying higher than fair market prices for the goods or services, then fraud has occurred. This is because the involved individuals will benefit financially through higher valuation of stock or direct distribution of proceeds from doing business with the company. The victims here are those who expect company officials and employees to act in the best interests of the company, rather than in selfinterest. The loss is dollars needlessly spent on overpriced or unnecessary goods and services. Conflict of interest can also exist and result in fraud when an organization has a hidden interest or benefit from the outcome of an event or transaction. In a government environment, for example, this more subtle type of conflict of interest could occur if government officials, acting on behalf of the government, either alone or in conspiracy with providers of services, obtain state and federal funds and use those funds for other than intended program purposes. In this instance, the government agency, in acting as the conduit of state and federal funds, has a hidden self-interest that is actually or potentially adverse to the interests of the state and federal government. An example of this would be the following situation:-
An agency official directs the owner of a company doing business under contract with the agency to provide the agency with equipment and contractor staff that will be used to perform work for the agency that is unrelated to the terms and conditions of the contract, and unrelated to the federal program under which the contract is funded. This favor and benefit creates a conflict of interest because there is no longer an arms-length relationship between the agency, which acts on behalf of the government, and the contractor. When seeking payment, if the contractor intentionally bills the hours for non-contract work as having been expended on contract related activity, then the contractor has committed fraud. If the fraudulent billing occurs with the knowledge of the agency official; and/or the agency official instructs lower level staff to approve the bill for payment from agency accounts; and the agency in turn files a claim for reimbursement with the federal government, which the federal government, in good faith, pays, then the agency official has also committed fraud under federal law. The example given is a fraudulent act resulting from conflict of interest because the actions of selfinterest by the contractor and the official acting on behalf of the agency are hidden from the state and federal governments, and constitutes obtaining state and federal funds under false pretense (see False Statements and False Claims, below). The victims are the state and the federal government, from which the funds were obtained, and the loss is the funds illegally obtained.
result, the employee is paid for the time not worked. The same principle applies to an employee who falsifies a travel voucher by reporting expenses that were not incurred. The victim is the employer, and the loss is the money wrongfully paid to the employee. A senior company official disagrees with a court decision for which all legal remedies have been exhausted, and which the company must therefore comply with. The decision has a significant financial impact on operations. The senior official knowingly and intentionally continues practices that the court decision has prohibited. The failure to comply with the ruling results in the chief operating officer filing false statements, reports and vouchers with the government. The victims are those who rely on accurate reporting to the government, and the loss is funds illegally obtained or expended; or economic or property losses incurred because of the improper reporting. A company performs contract work for a government agency. Under the direction of company managers staff charge time to a government program that reimburses 75% of incurred costs, instead of charging the time to the actual government program that they worked on, which only reimburses 50% of incurred costs. The employees recognize that the wrong program is being charged for their time, but are unaware of the differing reimbursement percentages. When the employees question their instructions, the company managers tell them not to worry since both programs are paid from government funds, and the cross-charging doesn't really matter. The government is subsequently fraudulently mischarged as a result. The company managers have engaged in fraudulent activity that results in false statements, false claims, and probably mail fraud. Under U.S. law, the employees who filed the false time reports are guilty of conspiracy to defraud. Though the employees neither benefited from the mischarging, nor were aware that the mischarging was illegal, they are also parties to false statements, false claims mail fraud and conspiracy statutes. The employees knew they were improperly charging their time, and by falsely preparing the time documents, the employees concealed the fraud. Whether they knew that the mischarging was illegal is not a consideration. As a result of the employees' actions, when the government was billed for reimbursement, the company managers were able to defraud the government of costs that should have been borne by the company.
6. Extortion
Extortion occurs when a person or organization obtains something from another individual or organization under color of official office and/or through the use of actual or threatened force or fear, including fear of economic or fiscal loss. Examples of Extortion: A government inspector solicits payment from the owner of a business regulated by a government agency, and in order to secure the payment, the inspector threatens the business owner with charges of severe code violations and heavy fines. Faced with a threat of economic and fiscal loss, the business owner makes the payment. In this situation, the victims are those who rely upon the honest reporting of safety issues and deficiencies. The loss is salary paid to the inspector for work not performed and the money extorted from the business. An official responsible for contract procurements also has a great deal of influence among contract procurement officers in other companies and government agencies. The official informs a contractor that in order to continue receiving contracts, the contractor must provide special gratuities, favors or services without compensation to the contractor. If the contractor fails to cooperate, the official threatens to blacklist the contractor and cut the contractor off from any further work. Faced with a threat of economic and fiscal loss, the contractor complies. In this case, the victims are those who rely upon the official to carry out duties and responsibilities with honesty and integrity. The loss is the cost to the contractor of providing non-reimbursed services.
8. Conspiracy
Conspiracy occurs when there is the specific intent that a crime be performed; and there is an agreement with another person to engage in or cause that crime to be performed, and one of the conspirators commits an overt act in furtherance of the conspiracy. At state and local levels, there are various degrees of conspiracy, ranging from misdemeanors to felonies, depending upon the crime that is committed. Under U.S. federal law, conspiracy is a felony. When two or more persons conspire to defraud the United States, or any agency of the United States, for any purpose or in any manner, each person is subject to a $10,000 fine and imprisonment of five years. Examples of Conspiracy All of the crimes previously described could be prosecuted under conspiracy statutes if the elements of conspiracy exist.
Examples of Breach of Fiduciary Duty: All the previously cited examples of bribery, illegal gratuities, fraudulent conflict of interest, and making false statements are felony crimes. They are also breaches of fiduciary duty. This means that in addition to criminal charges, the persons who have committed wrongful acts can be sued for damages in civil court. There are other types of breach of fiduciary duty. These fall under the umbrella of gross negligence, gross mismanagement, and abuse. An example would be failure to design adequate systems of internal controls that ensure the accuracy of data and information upon which company funds are disbursed. The victim is the organization, and the loss is the funds inappropriately disbursed.
11. Embezzlement
Embezzlement is the fraudulent conversion of personal property by a person in possession of that property where the possession was obtained pursuant to a trust relationship. Examples of Embezzlement: Typical examples are the use of a kiting or lapping scheme to steal money.
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Kiting can occur when a bank allows withdrawals to be made on checks deposited by a customer but for which the actual funds have not yet been collected from the bank on which the check is drawn. In reality, the cash could either be in transit or non-existent. Goods and services are then purchased, or cash is obtained from legitimate sources, by writing checks against non-existent account balances. The fraud is perpetuated by continuous "kiting" from bank to bank checks that are drawn on non-existent funds. In a kiting scheme, the victim is usually the bank that has paid out on uncollected deposits, and the loss is the money paid out by the bank. Lapping is the use of funds received from payment of accounts receivable to cover a theft of cash. The perpetrator initially steals cash tendered in payment of an outstanding receivable. To cover the initial theft, a payment made by a second customer is charged against the account from which the initial theft was made, thus "lapping" the two accounts. Payment from a third customer is used to cover the second account, and so on. The victim in a lapping scheme is usually the company from whom the money was stolen, and the loss is the amount of money stolen.
12. Failure to Report a Federal Felony to Appropriate U.S. Law Enforcement Authorities
If an individual: knows that a fraudulent act has been committed under federal law; and fails to report the fraudulent act to appropriate U.S. law enforcement authorities; and then actively engages in concealing the fraudulent act or evidence of the fraudulent act; then that individual is guilty of a felony crime punishable by up to three years in U.S. federal prison. Examples of acts to conceal fraud include: changing, hiding or destroying official records in order to conceal the fraudulent act; suppression of evidence regarding the fraudulent act; directly or indirectly causing others to withhold or suppress information pertaining to the fraudulent act; making false statements to investigators regarding the fraudulent act; or any other affirmative action designed to conceal the fraudulent act from authorities. Consider the implications of this for auditors: Since the auditor's primary duty is to examine, evaluate and report, if an auditor becomes aware of fraudulent activity, and fails to report it to appropriate law enforcement authorities a prosecutor could argue that the failure to report is an "affirmative act" by the auditor to conceal the fraud.
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payment totaled about 30B yen ($390M). The company has yet to explain why it paid advisory fees worth more than a third of the value of the deal to two financial companies, one of which is based in the Cayman Islands. In an October, 2011 article I explained that it seems clear that the companys board has failed to effectively provide independent oversight on behalf of shareholders. Only three of the companys 14 directors are independent. None of the companys independent directors have experience in the camera or electronics industries. One of the companys independent directors is a medical doctor. Furthermore, not one independent director appears to have significant experience in risk management. Woodford, Olympuss former CEO, has stated publicly that he commissioned Pricewaterhouse Coopers, the accounting firm, to conduct an independent investigation, the results of which he distributed to the board of directors. He said that the day before he was fired he had called for Olympus executives, including Mr. Kikukawa, the companys 71 year old Chairman and former CEO, to resign. Olympus denied the allegations of misconduct, but in the end, the company found itself targeted by investigations by the U.S. Federal Bureau of Investigation, the U.K.s Serious Fraud Office, and by authorities in Japan. In late October, Mr. Kikukawa resigned as Olympuss chairman. The company announced that its entire board would resign by early 2012. In December, Olympus announced a $1 billion hole in its balance sheet, and saw its offices raided by Japanese prosecutors. The companys legal troubles will no doubt continue in 2012.
National News
Fraud & Corruption News
Expensive Government land on Murree Road allotted illegally
Government land costing billions of rupees on the Murree Road has allegedly been allotted. While widening the Murree Road in 1998-99, the then Punjab chief minister, who also holds the post now, had decided to allot alternate land instead of financial compensation to some of the affected persons.
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Working swiftly, the Highways Department first got transferred six acres of land on the main Murree Road owned by the Agriculture Department in their own names and then transferred it illegally to fake victims. The Revenue department had also declared the allotment illegal six years back. After probe, it was learnt that land was provided to Raja Abdul Latif without any legal justification ignoring the legal claimant Zia Rashid. Likewise, Raja Shafqat, son of Raja Mohammad Siddiq, was also allotted land while the actual claimant, Mohammad Hashim Khan, son of Haji Manzoor Hussain, was ignored. Two other real claimants Mohammad Usman and JamilaAkhtar were also not included in the list. A six-member committee consisting of officials of the Revenue and Highways departments in the light of a detailed report of tehsildar Rawalpindi had ruled that all bogus allotments may be cancelled and the land illegally allotted maybe got vacated. The committee had also ruled that the genuine affected persons may be given alternate lands elsewhere.
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determination had reported in detail the findings of the UFG study. The OGRA had reported in its 2005-6 judgment that UFG in nine gas companies in the US stood at less than one per cent, 12 companies up to two per cent and another nine companies up to four per cent. These companies had consumers in excess of 500,000 and up to four million. It said the UFG level for similar integrated companies in Australia ranged between 1.9 per cent and three per cent, while such losses in the UK were estimated at 0.7 per cent. As such, the four per cent target for UFG to be achieved in 2011-12 `is reasonable and provides more than sufficient allowance to cater for peculiar local operating conditions, including socioeconomic patterns, higher pressure requirements and related factors`, OGRA said, adding that the argument for aging network was also not sustainable for the fact that it has been allowing expenditure on system augmentation and maintenance of gas pipelines. The NAB in its inquiry report submitted to the apex court said `unless the decision is reversed Rs7-8 billion will continue to be added on a yearly basis for indefinite period of time` and recommended `conversion of the inquiry into investigation` to scrutinize the record for further deliberations. Under formal investigations, the NAB gets the powers to take record into custody and make arrests of alleged persons.
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pressurize him so that the business house would not proceed with litigation against him. Hamoodur Rehman told this correspondent that Rasool kept talking to the prime minister on the phone during a one-hour stroll at the PM House, making them believe he was a close friend of the premier, and that the Federal Investigation Agency or any other department could not act against him. Believing this, the complainants continuously tried to put moral pressure on Rasool to pay the amount after all his agreements, promises, oaths, and checks were dishonored. Khurram Rasool kept ensuring the victims that he was an honest person and would return their money. Karachi Chamber of Commerce and Industry (KCCI) caretaker President Muhammad Saeed Shafique also wrote letters to Interior Minister Rehman Malik and FIA Deputy Director, Karachi, Altaf, on May 30, 2010 on behalf of the victim, Haji Abdul Hameed, who is also a member of the chamber, and informed them about the details of the fraud, demanding action against the accused. But the FIA did not act against Khurram Rasool even after one-and-a-half years. In the meanwhile, senior member KCCI Siraj Qasim Teli also met Rehman Malik in person and informed him about the details of the fraud, after which the interior minister forwarded the application to the FIA with his reference. After a few days, FIAs Inspector Nabeel Mehmood called the victims and told them that a case could not be initiated against the accused on the basis of mere claims and refused to register an FIR. Haji Abdul Hameed told this correspondent that the accused opened an LC for Rs.30 million at Bank Islami, Kharadar branch, to import scrap from Ghana and made three shipments from the African country to Karachi on November 17, 2008, November 27, 2008 and December 1, 2008. However, instead of delivering, the scrap was sold off from the godowns of Maersk shipping company, while the accused stayed put in Ghana during this period. Haji Abdul Hameed sent his business partners to Ghana, who met Khurram Rasool in his business office there. The media coordinator to the PM kept demanding money from them on one pretext or the other and they sent him the cash through the Western Union, receipts of which are available with this correspondent. In the meantime, the accused also made Haji Abdul Hameed pay money to his friends and business partners. KhurramRasool conned Rs.49.458 million from the victim. Haji Abdul Hameed and the directors of his company have also filed a case against Bank Islami and Maersk in the Sindh High Court in which they have requested the court to order the accused to pay their money back. When FIA Deputy Director Altaf was contacted, he said investigations against Khurram Rasool were in their preliminary stage but it looked the accused was already in deep trouble.
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percent more than the awardee i.e. M/s ZEL and that is the main reasons that the management had decided to award the contract to the lowest bidders. However, spokesman of the losing bidder also claimed that they (M/s ENAR) had offered 50% lowest bid but they were knocked out on technical basis from the bid. He further apprehended that the OGDCL management would compensate the awardee bidders by making changes through variation order, change order or amendment in the final MOU. As per PPRA rule 48 & SOP 46 of Manual of Procurement Policies and Standard Bidding Documents for Goods, Works and Services of PPRA, the other bidder sought rebuttal from grievance committee of OGDCL pointing out grass-root violation in the pre-qualifying of M/s ZEL, but the OGDCL grievance committee called the aggrieved management for a meeting on January 23, 2012, alleged the official of the other bidder of this multi-million dollar project. Instead of announcing the result to ENARs representatives, the OGDCL had arranged a kick-off meeting on the same day with M/s ZEL for issuing the LOI of the said projects. The team of M/s ZEL comprises three ex-management officials of ENAR. Mahmood Ali Ahmad, Pervaiz Rizvi and Sajid Pervaiz have been shown as ZEL employees whereas they are already employees of ENAR Petroleum Refining Facility (EPRF). Similarly, these executives have allegedly been involved in malpractices, misuse of power and illegal acts by forming a trust, incurring a huge loss to the ENAR, an attached department of the Ministry of Production. A case with FIA, Karachi, was filed against these individuals, said a letter of the ENAR to Director FIA and exclusively available with The News. Responding to various queries by The News, Syed Atiq-uddin Shah, Managing Director of M/s ZEL, only said, There is no irregularity in the bidding process and then cut off the call. The KPD-Tando Allah Yar project, which was annulled more than three times by the OGDCL management, would produce 400 MMSCRFD gas, 4,500 bbl/day oil and 400 metric tonnes of LPG per day, Mela has the capacity of producing 20 MMSCFD gas, 7,500 bbl/day oil and 20 metric tonnes/day LPG, whereas the Neshpa will produce 45 MMSCFD gas, 1,200 bbl/day oil and 40 metric tonnes/day LPG.
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cost because of a surge in the price of furnace oil to Rs.65,000 per ton from Rs.45,000 per ton. He said that passing of monthly fuel oil price of June, July on end consumers was earlier banned by the court, which was later allowed. This was also the reason for the recent inflated bills. Saeed said High Speed Diesel is more expensive than furnace oil. The NEPRA chairman also told the meeting that the regulator had also proposed erasing of slab benefits of consumers who consume 1,000 units in one month. He said that 100 units slab consumers are highly subsidized while those who consume up to 300 units are also substantially subsidized. But consumers who consume 700 units or more are paying the full cost and even paying beyond the marginal cost. He said commercial and industrial consumers are paying the full generation cost of electricity, but agriculture consumers are being provided subsidy.
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payments for reasons known only to them, `he said, adding he had sent a letter to the finance minister to apprise him of the delays and its impact on the growers and the industry. `The ultimate sufferers will be growers whose payments will be delayed due to the TCP`s attitude. He said Pakistan produced the best quality sugar in the world. `The so-called codal formalities usually take only a few days to complete. It is for the first time that such a long delay has been caused in the release of payments to the millers. Have they found any virus in our sugar this time that is holding the TCP from making our payments? `He asked. Mr Kayani said the TCP officials took no time in awarding contracts and opening LCs without fulfilling codal formalities when low quality sugar was to be imported, but were taking their time in making payments against the purchase of good quality sugar. `Why? We do not understand, `he said. He said the TCP officials told him that some results of the tests from the PSQCA had been received and the rest were awaited. The TCP has procured sugar from the mills in line with a decision taken by the Economic Coordination Committee (ECC) in December to create a strategic buffer stock to enable the government to maintain its ability to stabilize the market in case the product`s prices rise. The ECC has also decided to purchase another 100,000 tons of sugar and is expected to procure up to 625,000 tons sugar. Another objective of the local procurement was to lift a part of the expected surplus of 1.1-1.2 million tons from the current harvest`s output projected to be over five million tons and facilitate the millers make early payments to growers for their crop. The current crop is estimated to transfer Rs.250 billion to the rural economy this year. The PSMA chairman also urged the government to allow the industry to export up to 500,000 tons of sugar. He said even after the government`s expected procurement of 700,000 tons, the industry would still be left with around 400,000-500,000 tons of sugar from the current harvest. Dawn made several attempts to reach TCP Chairman Syed Tahir Raza Naqvi for his views on the issue but he was not available.
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government had planned to build houses for them. He said Sindh also had Rs.2.5 billion for the houses and when Rs.1.15 billion was received from the central Zakat fund, the Sindh government also added its share to the amount for the purpose. He said that keeping in view the number of people affected and houses destroyed, it would not be possible to build houses for all the affected. To handle the issue in a transparent manner, a committee had been formed which would address the issue. The step was taken to ensure transparency and to preempt allegations of nepotism and favoritism, he added. The CM agreed that around a couple of years had passed since the floods hit the province and, asking the flood victims to be patient, said that soon the houses would be constructed and handed over to affected people. He remarked: `Rome was not built in one day`. He said the federal government had also promised to provide funds for the houses, but the money had not yet been provided to Sindh yet.
Transmission issues: Power companies blamed for Rs.90 billion electricity losses
The Water and Power Development Authority (WAPDA) has held the board of directors of power distribution companies responsible for failing to improve the distribution system, which is incurring losses of more than Rs90 billion annually and spiraling the circular debt to record levels. In a report submitted to the energy committee formed by the prime minister, a copy of which is available with The Express Tribune, WAPDA says that the basic issue of majority power distribution companies (Discos) is poor governance and limited accountability. Hyderabad Electric Supply Company, Peshawar Electric Supply Company, Quetta Electric Supply Company and Multan Electric Supply Company collectively are losing power worth Rs.90 billion annually in the distribution system. These companies are not even managing to post a revenues of Rs.90 billion in a year, says the report. There should be no political and administrative interferences in Discos, says the report. Poor maintenance by former WAPDA operated power generation companies are producing almost 6 billion less units per annum than the optimum level. WAPDA recommends that provincial government representatives should be included on the boards of power distribution companies to share the responsibility and be administratively more involved in controlling line losses along with improving revenue recovery. It also proposed to lease out inefficient feeders of power distribution companies to ensure better bill collection and delivery of services. WAPDA further suggested that keeping in mind that tariffs are already at a high level, the revenue gap should be covered through improving inefficiencies. Owing to dismal efficiency level, generation companies are burning additional fuel worth Rs.11 billion per year, a cost that can be saved if optimum efficiency level is obtained, report adds. Power generation companies should be leased out or listed on stock exchanges and its industrial consumption should be preferred, report adds. The National Transmission and Dispatch Company (NTDC) is losing power worth Rs.6 billion annually in transmission, more than the normal standards. These are the real reasons of existing circular debt which has paralyzed the national economy and made life difficult for the common man, the report says. According to the report, WAPDAs hydel power is the worst affected due to inefficiencies of power distribution companies and getting collecting merely 55 per cent of its billed amount even after selling it at Rs.1.03 per unit. WAPDA also noted that the energy generation mix was equally divided 50-50 between thermal and hydel but in 2010 hydels share dropped to 32 per cent while share of thermal generation increased to 68 per cent. In year 2010-11, hydel power cost in public sector was Rs.1.54 per unit, Rs.8.74 per unit cost of electricity by public sector thermal plants, Rs.9.07 per unit by Independent Power Producers and Rs.31 per unit cost of power by rental power plants.
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The Federal Board of Revenue (FBR) has detected tax fraud cases of over Rs.6 billion, committed through collusion of unscrupulous elements and corrupt tax authorities, The News has learnt. But the FBR has so far taken no action against the officials involved in these cases. Action was taken only in one case but that too was reversed within one week following the change of Regional Commissioner Karachi-III, a top official of the FBR disclosed while talking to The News here on Sunday. Such cases were also discussed during the last commissioners conference held a few days ago at the FBRs headquarters under the chairmanship of former chairman FBR Salman Siddique, who retired on January 21, 2012. The FBRs directorate intelligence and investigation has found that SRO 775 was misapplied in 7,000 cases, causing Rs.1.874 billion loss to the national exchequer. The board had sent region-wise cases to all concerned authorities to pursue them in months ahead and come up with the exact loss to the national exchequer. In a telling development, an official of Karachi Custom Intelligence, who investigated one such case, was allegedly himself found involved in getting favors. It was discovered that the persons and companies allegedly involved in this case transferred Rs.140 million into the account of his son during the period when he was investigating this particular case. The case came under discussion in the last Commissioners conference and evidence was also handed over to the concerned authorities against the officers involved in these cases but no action was taken against them. The FBR also detected over Rs.2 billion refund fraud cases as well as those involving stuck up withholding tax amount, which was collected but not deposited into the national kitty. The FBR, the sources said, also detected Rs.1.995 billion frauds in Federal Excise Duty where in two major cases the tax was not deposited fully by the beverages companies. We have identified the culprits and law will take its course, added the official. Another scam surfaced wherein Rs.400 million bogus refunds were issued and an official of the Enforcement Wing was suspended on December 7, 2011. But when Chief Commissioner Inland Revenue Service (IRS) of Karachi-111 was changed the same suspended official was restored on December 14, 2011. When Member Inland Revenue Service Shahid Hussain Asad was asked why no action was taken against the officials involved in these fraud cases he said that an inquiry would be conducted in such cases and stern action would be taken against those found guilty. Sources disclosed that the FBR has so far sent 300,000 notices to potential non-filers of whom over 60,000 have filed their returns. We have so far received tax of Rs.665 million from these persons who have now become taxpayers, the sources added.
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carrier had faced such turbulence for so long. PIA is not on brink of collapse, however it is a fact that the airline is in a sorry state of affairs, acknowledged the minister, replying to questions posed by lawmakers during the question and answer session in parliament. Asked why PIA was incurring losses despite growing domestic air traffic, Mukhtar said that high fuel costs were a factor. We are looking to the government for help, before the national airline edges closer to the verge of collapse like Pakistan Railways, he added. Despite the crippling losses, PIA employees both retired and serving enjoy free travel in Pakistan as well as abroad, observed Senator Najma Hameed. Former directors and other board members are entitled to 12 tickets in economy and business plus, including other facilities, the written reply stated. Lawmakers were also informed during the course of proceedings that seven out of 26 airports were closed down due to the suspension of PIA flight operations on account of insufficient traffic load. Neither PIA nor any other airline is interested in conducting flight operations from the closed airports, he said. The Civil Aviation Authority (CAA) will consider proposals to make flights operational from the closed airports, said the minister. Earlier, the ministry of defense revealed that over the past three years 2,171 people were recruited by PIA. The number of people hired by the incumbent government is the highest in the history of the national flag carrier, with 1,179 employed in 2010 alone. A paradigm shift is needed in PIA, wrote Mukhtar in reply to this point. However, he maintained that there would be no reduction of manpower in operational staff such as pilots, aircraft engineers and specialized professionals. The defense minister also disclosed that over Rs.2.16 billion has been allocated for the Pakistan Space and Upper Atmosphere Research Commission (SUPARCO) in the current fiscal year (2011-12) budget. The highest amount, worth Rs.1.5 billion, will be spent on the Pakistan Communication Satellite System, he said. A memorandum of understanding has been signed between SUPARCO and the Institute of Remote Sensing Applications for scientific cooperation on the operational use of remote sensing technology in the fields of agriculture, water resources and disaster risk assessment.
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of John F. Burns 1998 article House of graft: tracing the Bhutto millions a special report; Bhutto clan leaves trail of corruption that had appeared in the New York Times and also made use of material in BBCs obituary story on Benazir Bhutto and Raymond W Bakers 2005 book Capitalisms Achilles Heel: Dirty money and how to renew the free-market system. It is pertinent to note that the key partners of the International Centre for Asset Recovery of the Basel Institute on Governance in Switzerland include the International Monetary Fund, the International Ant-Corruption Academy, the Council of Europe, the European Bank for Reconstruction and Development, the Organization for Economic Cooperation and Development (OECD), the Swiss Agency for Development and Cooperation, State Secretariat for Economic Affairs of Switzerland, Transparency International, For the sake of knowledge, the Stolen Asset Recovery Initiative of the World Bank and United Nations, The United Kingdom Department for International Development, the United Nations Development Program, the United Nations Office on Drug and Crime, Swiss National Science Foundation and the University of Basel (Switzerland) etc. The Basel Institute of Governance website also carries an interesting introductory paragraph about one of the books Non-state actors in assets recovery that has been published under its auspices. The paragraph, which is bound to raise many an eye-brow, read: Non-state actors are of fundamental importance in the prevention and combating of corruption within asset recovery processes. Their roles and responsibilities were considered during an experts meeting hosted by the Basel Institute in September 2010. This book contains essays presented at the meeting, written by practitioners and academics with extensive experiences in the numerous fields, which comprise asset recovery processes. The contributions offer a diversity of views on roles, which non-state actors can play in preventing and combating corruption and other forms of financial crimes. This Swiss institute under review says it is compiling case studies on small and large precedent-setting recovery proceedings, which would soon be made available on its website with convenient links to relevant judicial, legislative and executive documents. It has also invited affected states to submit information on ongoing and past recovery cases for inclusion under country specific headings. The institute maintains on its website: As the amount of case information in this section grows, the Centre will index and cross-reference the volume of material by key features such as jurisdiction, criminal or civil, freeze orders, etc. However, a lot of details about two dozen corrupt global rulers and key government functionaries are already available with facts pertaining to the efforts being made by the ruling regimes of the robbed countries to ensure the repatriation of their stolen assets, many of which are still stashed in off-shore havens like Switzerland. The corrupt international rulers/government officials discussed on the website of the Basel Institute of Governance are: Hosni Mubarak (recently deposed Egyptian dictator), Ferdinand Marcos (former rulers of Philippines), Jacob Zuma (President of South Africa), Jean-Claude Baby Doc Duvalier (defamed ruler of Haiti), PavelIvanovichLazarenko (former Prime Minister of Ukraine), Daniel arapMoi (Kenyan dictator), DiepreyeAlamieyeseigha (a Nigerian Governor), Frederick Chiluba (former Zambian President), Tommy Suharto (son of former Indonesian ruler Suharto), ShriSukh Ram (former Indian Union State Minister for Communications), Omar Bongo (former President of Gabon), Arafat Rahman Koko (son of former Bangladeshi Premier Khalida Zia), Raul Salinas (brother of the former President of Mexico), Zine El Abidine Ben Ali (former Tunisian dictator), Joshua ChibiDariye (a former Nigerian Governor), General SaniAbacha (former Nigerian dictator) and Vladimiro Lenin Montesinos (ex-head of Perus secret service under President Alberto Fujimori) etc.
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government departments increased during the period from Rs.142 billion to Rs.172.93 billion and of private sector consumers from Rs.142.644 billion to Rs.171.67 billion. The Karachi Electric Supply Company remained the biggest defaulter. Its arrears increased by Rs.11 billion to Rs.51.95 billion from Rs.40.89 billion. The Federally Administered Tribal Areas was second on the list with Rs.10.37 billion arrears, followed by Azad Kashmir with Rs.9.88 billion. During the first five months of the current fiscal, PEPCO tariff was raised by Rs.3per unit -an average increase of almost 30 per cent. `The figures reflect the reality of power sector which has become a rudderless ship over the past few months, says a PEPCO official. `No-one knows who is running the sector? Officially, it should be the water and power ministry, but practically the finance ministry is running the show because of huge subsidies involved. It does not have the required expertise, thus relegated the sector to the Planning Commission. He said all of them jointly, and officially, dissolved PEPCO but it still existed and no-one knew what kind of relationship the company had with distribution companies. A former member (power) of WAPDA said seven of the nine distribution companies were being run by officials working on an `acting charge basis.
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the allocations for development. Moreover, such approvals subsequently create de facto situation when the formal request for approval is submitted. This practice needs to be curtailed the report recommended. It also states that yet another method for sanctioning projects is the special directives or those nominated by the legislators. Both types circumvent stated procedures. Politically motivated projects can be justified as long as they are well thought out, aligned with Medium Term Development Framework (MTDF) and Medium Term Budgetary Framework (MTBF), planned and monitored properly, and executed under a robust project governance model.
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financing mechanism and extension of closing date till June 2016. The IDA funding will support the expansion of the basic cash transfer program to eligible poor families and to introduce a co-responsibility cash transfer for BISP beneficiaries linked to primary education. With this package, the BISP intends to counter the long-term poverty cycle and reduce beneficiary dependence on the income support program, which is an objective stemming from the country`s social protection strategy. The National Targeting System and Expanding Coverage of Basic renamed from the National Targeting System will add support for the expanded coverage of BISP`s basic income support program and will cover additional costs for data processing analysis. The strengthening of safety net operations, which involves IDA credit of $81 million and $53 million from DFID, will be expanded to build on progress made to date, and to expand the focus of safety net operations to the introduction of a conditional cash transfer component. The BISP intends to provide all beneficiary families with primary school children ages six to 12 years a benefit with two components: abase transfer of Rs.1,000 in continuation of the present income support, and a co-responsibility transfer of Rs.200 per month for each child attending primary school, up to a maximum of Rs.600 for three children in a specified age range. The new funding will also support BISP in taking the pilots of technology-based payments to scale for enhanced transparency and accountability. It will support the additional surveys needed to measure the impact of the conditional cash transfer and the expanded period of cash transfers and help to make public the results of the BISP evaluation for both future policy making and public information on results. Appraising the project, the World Bank says that the potential positive social effects of the project are expected to be significant. The project design relies heavily on international experience as well as on work undertaken as part of the impact evaluation of a conditional cash transfer program pilot implemented by Pakistan Baitul Maal as well as findings from various analytical background papers prepared for the draft social safety net report currently under preparation by the World Bank and results of the impact evaluation of a conditional cash transfers pilot program implemented by Baitul Maal.
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received Rs.4 billion from the Planning Commission, under the Public Sector Development Program in December, which will also be spent on locomotives rehabilitation.
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Blown fuses: Cash-strapped civic body to pay Rs.8 billion for light bulbs
The capital managers have decided to execute a multi-billion-rupee plan that has been panned by all and sundry within the Planning Commission and Transparency International (TI), The Express Tribune has learnt. The Capital Development Authority (CDA) Chairman Farkhand Iqbal seems bent on getting the wheels turning on a Light-Emitting Diode (LED) project. Under the project, around 65,000 conventional streetlights in the city will be replaced by LED lights, which cost significantly more than normal lights, but have lower operational costs, longer life, and are more environment friendly. The CDA has awarded the LED lights contract, worth approximately Rs.8 billion, to a firm backed by an influential Islamabad-based businessman with close ties to the upper echelon of the ruling Pakistan Peoples Party. Transparency International (TI) expressed concern over the opaque manner in which the contract was awarded. TI Chairman Adil Gilani confirmed the development and said that TI is still investigating the project, while adding that he had asked the CDA chief to revisit the award decision as transparent procedures were not observed. The suggestion seems to have fallen on deaf ears. The project was also discussed by the
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Senate Committee on the Cabinet Division, during a recent meeting, with Committee Chairman Shahid Hussain Bugti referring to the project as a scam in the offing. CDA officials would not confirm the final award of the project, but sources said that it has already been awarded to an international company. The project will be financed by a loan from the Asian Development Bank. CDA officials said the proposed loan would severely impact the already weak finances of the CDA, which are bleeding in the red at the moment. The sources added that the. A senior CDA official said priority should be given to dozens of public-interest projects including new sector development and the replacement of water supply lines, both of which have been delayed due to the agencys inability to finance them. Sources in the Planning Commission told The Express Tribune that former CDA Chairman Imtiaz Inayat Elahi could not ensure the early execution of the project, which in turn led to his replacement with Farkhand Iqbal, who was the senior chief of the Planning Commissions energy wing. The sources believe that Iqbals background in the Planning department could help get the project pushed through. The sources also said that Iqbals name was forwarded by Faisal Sakhi Butt, the chairman of the new Prime Ministers Task Force on CDA and a well connected member of the ruling party. When approached for comment, Butt told The Express Tribune that he had only suggested Iqbals name from a list of potential candidates and that the final decision was the prime ministers alone. Another historic first may be connected with the deal, as CDA Electrical and Mechanical Director General Abrar Shah, who is also in charge of the project, was recently promoted to member engineering. It is the first time since the CDA was set up that an electrical engineer has been appointed member engineering, a post usually occupied by civil engineers. When The Express Tribune approached Faisal Butt, he said the LED lights project is vital for the city based on donors recommendations and the fact that the project would save the CDA 30 to 40 per cent on its power bills (around 18 megawatts) that could be used for other purposes, while adding that he had nothing to do with the project. CDA Chairman Farkhand Iqbal did not answer his phone when contacted. However, CDA spokesperson Ramzan Sajid said that Iqbal was busy preparing a presentation for Planning Commission Deputy Chairman Dr. Nadeem ul Haq on the citys proposed energy system. Dr. Haq would not comment on the project, saying that his comments had previously been distorted in the media, and he would not be making any statements on the issue.
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appreciating the SECPs initiative for improving liquidity in the market, enhancing investor education and awareness and the brokers capacity to trade, he announced the approval of SECPs proposal on revamping of Capital Gains Tax (CGT) submitted to the FBR last week. The SECP had been in dialogue with the Ministry of Finance and the FBR on the rationalization of CGT. The following solutions have been agreed upon for a more balanced and investment friendly CGT approach.
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To ensure transparency in transactions involving investments made by companies in their associated companies or undertakings through adequate and standardized disclosures to the members. To curb the unfair practices that have been observed in such transaction by imposing certain restrictions and conditions felt necessary based on regulatory experience; and To introduce detailed and standardized requirements in order to avoid ambiguities and fill the gap in the perspective of the corporate sector vis--vis that of the regulator in respect of investments in associated companies or undertakings.
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seasoned banker and a prominent capital market professional. He has over 20 years of major national and international financial markets experience. Mr. Asif Qadir, president and CEO, Engro Polymer and Chemicals Limited, has over 30 years of management and marketing experience of the chemical and fertilizer sector and has served in key management positions on the chemical giant Engro Corporation Limited. Mr. Abdul Qadir Memon, Fellow of the Institute of Taxation Management Pakistan and President, Pakistan Tax Bar Association, is a senior resource and is a renowned tax and corporate laws expert, possessing an in-depth knowledge about the various aspects and implications of the corporate matters and company laws. It is expected that the KSE Board in particular and the capital markets in general, will continue to benefit from the mix of extensive knowledge, global experience and diverse expertise that the above professionals possess. It is hoped that the directors will continue to contribute positively to promoting principles of good governance, transparency and will be instrumental in bringing about various capital market reforms.
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companies increased their authorized capital with the aggregate authorized capital increment of Rs.1.57 billion and 42 companies raised their paid up capital with the total paid up capital increment amounting to Rs.3.15 billion.
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presentations and highlighted their general and specific issues. The FBR officials present in the seminar addressed those concerns and noted down the suggestions for further perusal. The participants also appreciated the initiative of Taxpayers interaction, awareness and facilitation undertaken by the FATE Wing of the FBR and said that this should be made a regular feature. The Chief Commissioner RTO Hyderabad Mr. Misri Ladhani, thanked the participants for attending the seminar and making it a success. He also appreciated the efforts of FBR officials of RTO Hyderabad for arranging the event and thanked the FATE Wing for providing an avenue for interaction between the taxpayers and the Federal Board of Revenue. Additional Commissioner Mr. Farooque Azam Memon and DC (HQ) Mr. Peer Khalid also addressed the seminar. During the Questions and Answers session, the participants voiced their concerns over the topics covered in the presentations and highlighted their general and specific issues. The FBR officials present in the seminar addressed those concerns and noted down the suggestions for further perusal. The participants also appreciated the initiative of Taxpayers interaction, awareness and facilitation undertaken by the FATE Wing of the FBR and said that this should be made a regular feature. The Chief Commissioner RTO Hyderabad Mr. Misri Ladhani, thanked the participants for attending the seminar and making it a success. He also appreciated the efforts of FBR officials of RTO Hyderabad for arranging the event and thanked the FATE Wing for providing an avenue for interaction between the taxpayers and the Federal Board of Revenue. Additional Commissioner Mr. Farooque Azam Memon and DC (HQ) Mr. Peer Khalid also addressed the seminar.
FBR promotes officers of IRS to BS-20 & 21 on the basis of FST, Islamabad decision
The Federal Board of Revenue (FBR) strongly contradicts the false impression created through a section of the press on 29.12.2011 regarding promotion of IRS officers from BS-19 to BS-20 and BS-20 to 21, alleging that the promotions were made in gross violation of the verdict of Federal Services Tribunal, Islamabad. Promotions in Inland Revenue Service were made on the recommendations of Central Selection Board (CSB) and with the approval of the competent authority. Federal Service Tribunal in its decision dated 02.12.2011 had inter-alia observed that "Promotion and seniority are definitely not vested rights. Sections8 and 9 of the Civil Servants Act, 1973 read together with section 4(1) proviso (b) of the Service Tribunals Act, 1973 are very clear on that However, to be considered for promotion and seniority is a vested right. A civil servant may not be able to file an appeal to get seniority or promotion but he can definitely file an appeal to get meaningful consideration for his seniority/promotion. In the present case the appellants could not claim safeguard of their right to seniority and promotion. However, they could definitely make a prayer that they should have been considered correctly for their seniority/promotion. Recognizing the jurisdiction of FBR, the Honorable FST has further given observations as under:- That the Government/FBR is fully competent to decide this assertion of the appellants and respondents that some promotions have already been made in violation of seniority rules and even the aggrieved parties can seek remedy in appropriate forum. The Honorable FST vacated the stay order imposed on promotions with the following remarks: - That the FBR/Government may make promotions on the principle of seniority discussed above and the embargo imposed by the FST in that regard is lifted." In light of the decision of FST, Islamabad Seniority List dated 14.12.2010 is now valid for all practical purposes. Promotions already made from BS-20 to BS-21 and BS-19 to BS-20 vide Notifications dated 02.12.2011 & 03.12.2011 have not been rejected/nullified by FST, Islamabad and the final promotions were made in compliance of the orders of FST, Islamabad. The cases of those officers which could not be presented to CSB and so not considered for promotion due to seniority dispute or being junior in seniority in the impugned seniority list would be presented in the next CSB according to their seniority based on the list upheld by the FST. The senior officers if recommended for promotion would be re-assigned seniority in next scales as per their seniority upheld by the Honorable FST, Islamabad.
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become self-fulfilling, the Report said and added that striking a balance in managing a flexible exchange rate driven by economic fundamentals and by market speculation (within the context of sharp currency movements in the global economy) is challenging. SBP will continue to monitor the forex market closely to remove any excessive volatility in the Rupee, the Report added. The Report said the policy makers were hopeful that the country would put up a better economic performance in FY12 after last year, which was a difficult one for the economy, not only due to the devastating floods that hit the country early in the fiscal year, but also due to the lack of external financing and energy shortages. The Report observed that realizing the 4.2 percent growth target for FY12 GDP looks difficult due to a host of factors that include, among others, gas shortages, high oil prices and decline in global prices of agricultural commodities. (The complete text of the Report both in English and Urdu languages is available on SBP website: www.sbp.org.pk).
Mr. Yaseen Anwar asks banks to adopt agri. financing as viable business model
Mr. Yaseen Anwar, Governor, State Bank of Pakistan (SBP) has urged upon the banks to adopt agricultural financing as viable business model through development of specific products/ schemes and disseminate best practices through grass-root level programs for farmers. Presiding over a meeting of Agricultural Credit Advisory Committee (ACAC) at SBP, Karachi today, he said the relevant federal & provincial government departments, farmers representatives and other players in value chain also need to create credit absorption capacity of farmers through adoption of best modern farming practices, development of storage & marketing systems and resolution of other real side issues. He said that heavy rains of 2011 and devastating floods in 2010 have greatly affected the national economy in general and agriculture sector in particular. The credit requirements of farmers have also increased significantly besides adjustment of existing agricultural loans, he said, adding that agriculture remains the mainstay with a contribution of more than 21% to the GDP and around 60% of the population depends on agriculture related activities for its livelihood. SBP Governor said that banks need to develop a comprehensive agricultural finance policy for settlement, rescheduling & restructuring of loans of the affected borrowers in addition to providing fresh credits for the rehabilitation and revival of the economic activities in the affected areas. The federal & provincial governments would also need to initiate support & relief packages for the affected areas, he added. Mr. Anwar said that in order to ensure timely and quick loan disbursement to help the agriculture sector and revival of economic activities in the affected areas, SBP in collaboration with banks has taken a number of initiatives including Refinance Scheme at discounted rates of 8% coupled with Credit Guarantee Scheme for loss sharing of banks up to 40%. Banks were also allowed to restructure the existing loans and write-offs in cases where the recovery of loans is not possible, Mr. Anwar added. He said the crop loan insurance scheme introduced by the government for production loans for five major crops has also supported the sector whereby claims of around Rs 800 million (including around Rs.550 million of the borrowers of ZTBL) have been settled by insurance companies in 2010 and 2011. He pointed out that agricultural credit is highly skewed towards farm sector i.e. around 68% whereas credit to non form sector including livestock sector is only 32% as compared with its contribution of 55% to agriculture GDP. The SBP Governor announced the setting up of an Implementation Committee to ensure timely implementation of the action plan prepared by the ACAC Special Committee, constituted in December, 2010. This Implementation Committee will be headed by the Executive Director, State Bank of Pakistan and include members from provincial agricultural departments, farmers representatives, Pakistan Banks Association (PBA), ZTBL and SBP Banking Services Corporation. The Committee will also collaborate with Regional Agriculture Focus Groups of SBP-BSC offices to get feedback on the implementation strategy and ensure timely implementation of decisions/ recommendations. The update on the progress of implementation would be made to the ACAC in its next meeting. Mr. Anwar highlighted the key initiatives taken by SBP during July, 2010 to December, 2011 that include: Introduction & completion of Pilot Project Phase III with 87% achievement of set targets, in 51 agriculture intensive districts covering 75% of total farm households in the country.
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Successful arrangement of six Training Workshops for CAD/Risk Management Departments of Banks on Agricultural Loan Documents/Procedures, training 178 senior officials of agricultural lending banks, SBP and DFSD, SBP-BSC. Finalization of a primary framework of commodity operations after deliberations with key stakeholders which will evolve proper storage, fair & transparent price mechanism & postharvest financing system (the assignment has now been shifted to Pakistan Mercantile Exchange for its implementation). Arrangement of Agribusiness Finance Workshop at Netherlands for senior officials of SBP & SBP-BSC and agricultural lending banks to create awareness, build capacity of banks in enhancing outreach of agricultural credit. Launching of 6-week specialized Internship Program for students of Agricultural Universities/Departments from 5th July, 2010 at SBP to facilitate provision of quality human resource for banks in agricultural financing to achieve the overall objective of access to finance to the farming community. Arrangement of Knowledge Sharing Session with Central Bank of Indonesia for learning their key success factors in the area of agricultural/ rural finance. To educate agriculture graduates about the basic structure of agricultural financing, related policies, schemes, initiatives taken by SBP to enhance the outreach of agricultural/ rural finance, arranged eight Policy Adequacy and Awareness Seminars on Agricultural Financing so far at different agriculture universities of the country. To ensure timely disbursement of agricultural credit to the farming community, revised the list of documents to be obtained by banks against various kinds of agricultural loans and streamlined the turnaround time for agricultural loan processing through ACD Circular No. 02 of 11th August, 2010. In order to revive SMEs & agricultural activities in flood affected areas, issued a Refinance Scheme vide SMEFD Circular No. 16 of 2010 for improving access to finance in 78 flood affected districts notified by National Disaster Management Authority (NDMA). To ensure availability of credit to the farmers for the purchase and maintenance of efficient systems and techniques, developed Guidelines for Efficient Water Management Financing, which was issued vide AC&MFD Circular No.2 of 2011.
He said the above mentioned initiatives of State Bank are important but the real benefits can only be reaped through collaborative efforts of all the stakeholders including banks, relevant departments of Federal and provincial governments and farmers representatives. The meeting was informed the mid-year (July-December 2011-12) performance of agricultural credit remained satisfactory wherein, total disbursement registered an optimistic figure of Rs. 125 billion which included additional Rs. 5.5 billion by Microfinance banks as compared to the last years Rs. 102 billion for the same period with 23% overall growth rate. This positive trend indicates gradually building trust of formal sector towards agricultural financing because of its sustainable nature and showing signs of recovery after overall recessionary environment. An amount of Rs 285 billion is the indicative agricultural credit disbursement target for banks and Microfinance Banks (MFBs) for 201112 which is 8.4 percent higher than 2010-11 targets.
Financial Literacy Program to serve the interests of all financial sector stakeholders: Yaseen Anwar
Mr. Yaseen Anwar, Governor, State Bank of Pakistan has said the Nationwide Financial Literacy Program (NFLP) will work towards improving financial inclusion and also serve the interests of all financial sector stakeholders. Delivering his key-note address at the launching ceremony of the Program at SBP Learning Resource Centre, Karachi today, he said it will initially impart basic financial literacy to poor and marginalized people of Pakistan. He said the NFLP pilot will impart financial education and awareness on six personal finance themes that include budgeting, savings, investments, debt management, financial products, branchless banking and consumer rights & responsibilities to about 50,000 beneficiaries from low income strata. Pakistans first-ever Nationwide
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Financial Literacy Program (NFLP) has been launched with the support and collaboration of Asian Development Bank (ADB), Pakistan Banks Association (PBA), Pakistan Microfinance Network (PMN), Pakistan Poverty Alleviation Fund (PPAF) and Bearing Point. He said the program has been developed after the Financial Literacy Gap Assessment Survey of beneficiaries. The survey has been helpful in development and adaptation of curriculum and dissemination strategy. The curriculum will also be translated into national and main regional languages including Urdu, Sindhi, Punjabi, Pushto and Balochi, he added. SBP Governor said that the Program is financed under the ADB-funded Improving Access to Financial Services Fund (IAFSF) and implemented under the oversight of the IAFSF Committee which has representation from SBP, Pakistan Banks Association, Pakistan Poverty Alleviation Fund, Pakistan Microfinance Network, education sector, and the ADB. Upon completion of the pilot phase, an impact assessment of the pilot will be conducted by a third party, he said, adding that based on the experience and assessment of the pilot, the program will be scaled-up to target more than half a million beneficiaries all over the country. Mr. Anwar said that in addition to focused training sessions of beneficiaries, the dissemination strategy involves street theatres, board games, comic strips, activity-based competitions website and media campaigns to reach out the masses on a larger scale. The training sessions will be sourced from banks, Microfinance Banks (MFBs) and Microfinance Institutions (MFIs) based on their interest and pre-defined qualification criteria, he said and added that in order to encourage and incentivize participation from partners, professional fees and out of pocket expenses of partners will be reimbursed from the program budget. Besides involvement of local institutions, the project has formed international partnerships with international financial education programs including Microfinance Opportunities, Finmark Trust, Association of Microfinance Institutions of Uganda (AMFIU), Sewa Bank, Microfinance Innovation Centre for Resource and Alternatives (MICRA), World Bank Institute, Aflatoun, and others, Mr. Anwar added. SBP Governor said that consumer protection and financial education should be vital components of any financial inclusion initiative. It is now clear that policies which focus entirely on changing the supply of financial products and services can leave consumers ill-informed, vulnerable and not willing to participate in financial markets, he said, adding that focus of financial literacy program should be broader than financial inclusion. It should aim to increase consumer awareness about their rights, obligations and mechanisms for recourse to build a fair, inclusive and robust financial sector, he emphasized. He said: I would like to encourage financial service providers to partner in the NFLP rollout and exercise proportionate level of accountability and responsibility to act in the best interest of their clients. Intermediaries should fully disclose their terms and conditions to clients before selling them a product or service. Mr. Anwar said that many poor and non-poor people do not have a bank account and very few of them understand why this puts them at a disadvantage when it comes to their personal financial management. According to Pakistan Access to Finance Survey (A2FS), only 12 percent of the population has access to formal financial services. Whereas of the remaining 88 percent, only 32 percent are informally served and 56 percent are completely excluded, he said, adding that according to the A2FS analysis, about 40 percent of the financially excluded population reported lack of understanding of financial products as the main reason for financial exclusion. This clearly identifies the need for financial education as a systemic area to be addressed to tackle financial exclusion in a big way, he said and added that financial literacy has assumed greater importance in recent years for both developed and developing countries, therefore, best practices in this area are still evolving. He briefly touched upon various conventional and non-conventional measures adopted by SBP to boost financial inclusion which are as under:i. ii. SBP introduced Basic Banking Account (BBA), a simplified financial product for low income consumers. SBP introduced Microfinance Banking Regulations in 2001 to specifically meet the demands of low income consumers.
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iii. iv.
SBP has adopted innovative solutions to overcome geographical barriers, including branchless banking through retail agents and harnessing technology via mobile-phone banking. SBP has been managing various market interventions funded by donor agencies that include:-
a. The Institutional Strengthening Fund (ISF) providing grant funding to microfinance (MF) providers to top and middle tier MFBs and MFIs for key investments in HR, IT, product development, risk management systems, business plans and branchless banking development. b. The Microfinance Credit Guarantee Facility to link microfinance with financial markets for mobilization of wholesale commercial funding through partial guarantees. c. Similarly, the Financial Innovation Challenge Fund (FICF) for grants to innovative projects and testing new markets to lower cost of delivery, enable systems and procedures to be more efficient and provide new ways of meeting the larger demand for financial services. d. And the Improving Access to Financial Services Fund which is supporting todays program. However, he said that these are mostly supply side interventions aimed at increasing the financial services by removing bottlenecks and have raised financial inclusion to a certain extent. What has been missing is a demand side solution a program to impart financial education and awareness to consumers, he said, adding this recognizes that the very low level of financial awareness and confidence of financially excluded groups remains a strong barrier to their access and use of financial services.
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be to develop an implementation plan with clear time-lines and targets based on the strategy paper. A dissemination seminar was held at SBP, Karachi today to share the major findings of the study with banks and other stakeholders. Mr. Muhammad Ashraf Khan, Executive Director, State Bank of Pakistan chaired the seminar, which was attended by senior executives of banks and other relevant SME stakeholders. Addressing the participants, Mr. Ashraf Khan commented that in Pakistan, reliable and credible data on existing SME clusters is lacking, which hampers banks understanding of SME sub-sectors dynamics and resultantly makes them shy of lending to the SME sector. In this backdrop, he said, the State Bank has been collaborating with reputed research institutions/consulting firms to conduct research on key SME clusters to facilitate financial institutions in better understanding of the sectors and accordingly come up with improved products for these clusters. Today we are here to unveil findings of research report on fan cluster and emphasize upon banks to make maximum use of the study findings while designing banking products for the industry and fulfilling their financing needs., he added. Mr. Usman Khan, Project Consultant from LUMS, gave a detailed presentation to the participants covering the important aspects of the study, which was followed by a question-answer session. The study report on fan cluster is latest addition to the surveys of 10 important clusters recently conducted by SBP in collaboration with International Finance Corporation (IFC). The booklets of these surveys placed on http://www.sbp.org.pk/departments/ihfd-ifc.htm provide important guidance to banks on increasing lending to SMEs through customized and low-cost product programs.
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incurred by Lt Gen (R) Afzal Muzaffar, Lt Gen (R) Khalid Munir and Maj Gen (R) Khalid Zahir Akhtar. The meeting decided to write a letter to M/o Defense in the matter to inquire whether any proceedings are going on against these officials in this case or not. In case no response is received from the Ministry within a week, NAB will take cognizance of the matter and proceed according to law. The meeting held this morning was chaired by Adm (R) Fasih Bokhari. The Board authorized to conduct the investigation against misappropriation of funds through the acquisition of land by Workers Welfare Board for the construction of labor complex at Kot Najeeb Ullah at District Haripur. The meeting accepted the voluntary returns of Farrukh Ali Shah X-EN, Wapda and Abdul Hafeez Nagi Superintending Engineer GEPCO. The Board also approved the closure of inquiries against Fazal Dad Kakar DG and Muhammad Shah Bukhari, Project Director National Museum Karachi due to lack of evidence and on the report of PWD that work done on the project was of quality. In another case of traffic police Karachi when it was found that no proof of corruption was available in imposition of fines in lieu of fine charges from owners of vehicles parked in no parking zones, the inquiry was closed. It also closed inquiries against Nisar Ali Sheikh retired Chief Inspector Explosives, Aman Ullah Khan Jadoon, Former Minister Works and Services, KPK on the lack of substantial evidence. A case against PDA officials was also closed after the market price of a commercial plot by a buyer was paid to PDA as a result of settlement.
NAB starts Inquiries on the Orders of Supreme Court in Significant cases of Corruption
NAB has started conducting inquiries and investigation on the order of Honorable Supreme Court of Pakistan, against highly significant cases of corruption which included corruption in the affairs of Pakistan Railways, ISAF missing containers scam involving colossal and huge loss of duties/ taxes worth billions of rupees and corruption/misuse of authority in OGRA subsequent to the appointment of its last Chairman. Proceedings in all these issues have been initiated under the provisions of National Accountability Ordinance 1999 and significant progress has been made on some important aspects including recoveries in Pakistan Railways. In the scrap case, Railway officials and contractor are under custody of NAB out of which contractor has agreed to voluntary return of Rs.47 million as a difference for the scrap lifted so far from Railways and another Rs.240 million more as a difference in addition to the amount already agreed for the material / scrap to be uplifted by him. Negotiations are going on with Royal Palm Golf Club and its management has agreed to pay a substantial amount as increase to Railway authorities annually. Inquiry about the purchase of spares for Chinese locomotives is at the final stage which in fact was the major cause for halting the Railway operations. The Bureau is also conducting important matters of Bank of Punjab as per the directives of the Supreme Court of Pakistan. In this case NAB has so far recovered more than 5 billion rupees from the accused persons out of the defrauded amount of Rs. 9 billion and the process of further recovery is underway. As per the judgment of the apex court about revival of NRO cases, all of the terminated cases were revived and are being pursued in accordance with law. In this respect more than 100 weekly progress reports have been submitted on revived NRO cases before the Supreme Court of Pakistan. The matters pertaining to grievances of the general public and referred by the Honorable Court for redressal are being given due priority and
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compliance reports are being regularly submitted to the apex court. This shows the commitment of the Bureau towards its obligations on matters particularly entrusted by the Honorable Supreme Court of Pakistan. The Bureau is conducting its proceedings on the complaints received from various sources and matters referred by the Superior Courts. The matters related to high level corruption and particularly referred by the Honorable Supreme Court of Pakistan are being given high priority whether the referred matters are pertaining to corruption or redressal of grievances forwarded through Human Right Cell of the Apex Court.
NAB Forms Committee on Land Revenue System to Suggest Preventive Measures against Corruption
National Accountability Bureau, being apex anti corruption agency of Pakistan is committed to eliminate corruption and corrupt practices from society through focused approach as enunciated in National Anti Corruption Strategy. Since inception, NAB has been taking various initiatives to create awareness and devise preventive measures against corruption besides enforcement operations. At present the land revenue management system of Pakistan is perceived to be one of the highest corruptions prone areas which not only affect the agricultural community in the rural sector but also it is a source of perpetration of mega land scams in urban areas. To resolve the issue of illegal allotment of state land, the Chairman NAB, under the provision of section 33-C of National Accountability Ordinance 1999, has ordered to carry out a preventive study of land revenue management system. In the Executive Board Meeting at NAB Headquarter Islamabad, a case regarding grabbing Government land though illegal and dishonest means was put up for authorization of investigation. The other factors relating to corruption of revenue department were also discussed. The Chairman NAB Admiral (R) Fasih Bokhari thus ordered to form a committee under section 33-C of NAO 1999 to prevent the malpractices in the department by identifying inherent weaknesses and other grey areas causing corruption in the land revenue management system. Director General Awareness and Prevention Division Lt Col (R) Siraj ul Naeem has been assigned the subject task. Findings of the committee, after approval of the Chairman NAB will be forwarded to concerned quarters for incorporation in legislation, rules and procedures. All the stakeholders including Members Board of Revenue of all provinces will be taken on board. This effort of NAB will streamline the land revenue management system. It will not only help in minimizing the corruption from the system but will also reduce the number of litigations thus reducing the burden from the courts and provide substantial relief to millions of people.
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are to be supplied by a Dubai-based US firm, Transworld under a controversial multibillion-dollar agreement. That it was reported in newspapers on November 6, 2011, that PIA had allegedly committed corruption in 2010 Hajj operation by giving bribe to Saudi Officials. Adil said: It has also been reported in the press that PIA would be getting ten A321 aircraft and ten A320 aircraft in 2012. In 2013, PIA would acquire as many as four ATR-72 and five 777-300ER aircraft while it would get six A321 planes in 2014. The manner in which losses appear in PIA books reflect some foul play like Steel Mills (from plus Rs.12 billion to minus Rs.100 billion in 2011) and Pakistan Railways losses (Rs.56 billion loss in last 3 years), and similar Ministry of Water & Power case of RPP's in which LCs were mandatory, and daily rent was contracted to be paid whether the RPPs were operational or not (Loss of Rs 2.0 to Rs.2.5 billion monthly), KESC (illegal benefit of over Rs.50 billion per annum under amended agreement of 2009) and therefore needs a thorough probe into affairs of PIA as well to determine the factors causing loss to the national flag carrier which has a monopoly in Pakistan's skies and on face of it no one can say that this airline is running in huge loss. Gilani said who is responsible for corruption, and who is benefiting from such corruption and corrupt practices cannot be determined unless the Supreme Court of Pakistan takes suo motu notice of the facts and circumstances so that the persons responsible be punished and money pocketed by them at the cost of national flag carrier be recovered.
TI Pakistan urges CJP to take suo motu action against PIA for 'deliberate losses' (Part 1)
Transparency International Pakistan has requested the Chief Justice of Pakistan to initiate suo motu proceedings against Pakistan International Airlines for "deliberate losses being incurred by PIA at the cost of public money". In a letter sent to Chief Justice Iftikhar Muhammad Chaudhry, on December 12, 2011, Transparency International Pakistan Adviser Syed Adil Gilani said that PIA is following in the footsteps of Pakistan Railways, and is minus Rs.144 billion and in deliberate default of payment on repairs, which has resulted in the grounding of 12 aircraft, and is fabricating excuse for buying 39 aircraft at an estimated cost of $2.5 billion in violation of Public Procurement Regulatory Authority (PPRA) Ordinance 2002 and Public Procurement Rule (PPR) 2004. PIA employees' associations--Pakistan Airline Pilots Association (PALPA), Society of Aircraft Engineers of Pakistan (SEAP), Aircraft Technologists Association of Pakistan (ATAP) and Flight Engineers National Association (FENA)--have also alleged that "deliberate losses are being incurred by PIA at the cost of public money." The affairs of PIA are very strange, with contradictory statements given by PIA in National Assembly, which gives impression that nothing is right in PIA. Following serious facts/irregularities have been brought to the knowledge of the Chief Justice: That on February 24, 2011 Ahmed Mukhtar, Minister of Defense, informed the National Assembly (NA) that the national flag carrier, Pakistan International Airlines (PIA), was only operating in 27 countries out of more than 250. "The reason for not operating in other countries is that it is not economically viable." He further said that PIA currently had a fleet of 40 aircraft, insured with the National Insurance Company Limited (NICL), which are in operational condition. He said that although all the 40 aircraft are in operational condition; they are taken out of service for short durations for routine maintenance as per the maintenance schedule. However, on December 7, 2011, PIA tendered for leasing of 39 aircraft, with 12 aircraft to be introduced in next 4 months. The questions raised by Pakistan Airlines Pilots Association (PALPA), Society of Aircraft Engineers of Pakistan (SAEP), Aircraft Technologists Association of Pakistan (ATAP), and Flight Engineers National Association (FENA) is that there are no funds for purchase/lease of these planes, and also there is no need, as the Minister himself had declared that all 40 aircraft are operational. The allegations made by them against PIA management are the current status of PIA cancellation of flights, long delays, nonpayment of bills for firms repairing aircraft engines, viz. JALCO Amman, where four PIA engines were repaired and are ready for delivery for last five months, and two PIA engines of A 310, which have been repaired and are ready for delivery for last five months. But due to non-payment of dues, they have not been delivered. Instead, two aircraft were leased during hajj on huge payment made more than the dues for the six engines which would have made two A 310 and one B 747 operational. Many more allegations of corruption have been made by Joint Action Committee of PIA Employees (JACPIAE) in its letter of November 15, 2011. That the specifications and evaluation criteria tender documents for procurement of 39 aircraft are tailor-made for using discretion by PIA in evaluating the tenders which are violation of Rule No 10 as Specifications shall allow the widest possible competition and shall not favor
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any single contractor or supplier nor put others at a disadvantage, and Rule No 33, which prohibits PIA to introduce any condition, which discriminates between bidders or that is considered to be met with difficulty. Evaluation of financial proposal is not based on the lowest offered cost, which is the basis of PPRA, World Bank, and Asian Development Bank Rules. Likely delay in delivery schedule will carry revenue penalty, 75 percent seat factor of the seating configuration but limited to 143 seats. For seats above 143, 15 percent of additional seats will be taken for revenue calculation on year round basis, Cargo revenue shall be calculated at 60 percent load factor for available capacity after accommodating passenger baggage, taking the payload into consideration.
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and PIA are not performing, an increased level of corruption cannot explain these phenomena. On the contrary, all these are results of the mismanagement of the economy. So, those highlighting an increase in corruption under the present government must look for other credible objections to build a case against it. They would not have to work hard to point out other areas of failure of the present government and its policies on almost all fronts. The writer is an economist (PhD from Cambridge University).
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corruption. This finding is peculiar to Pakistan as in other South Asian countries; the predominant majority believes that government leaders or media can make a difference in their fight against corruption. What are the implications? Simply, institutions are perceived to be corrupt and urgent steps of revolutionary nature are needed to regain the confidence of the people. It is possible only through demonstration of strong commitment against the culture of corruption and cronyism, especially from the political elite. Cosmetic changes and slogans will not work. But one thing is encouraging that 89 percent of the survey respondents believe that ordinary people can make a difference through their fight against corruption. But in order for them to do so, their real empowerment is a sine qua non, which is possible by facilitating their access to political, social and economic opportunities.
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forces, he added. Last year, the judiciary came in sixth. Delay in case proceedings and punishment has heavily contributed to the development of a perception that the judicial system has also fallen prey to corruption, said Gilani.
Rampant corruption
Transparency International Pakistan (TIP) has released a stunning survey, putting land administration at the top of the most corrupt government departments while police, taxation, judiciary and the power sector occupy second, third, fourth and fifth positions respectively. In addition to this, the TIP has observed that the military is least corrupt, after the education sector. These findings are a source of terrible embarrassment for the nation. The police force has fallen to the second position from first, taxation climbed up by five places from last years eighth, judiciary moved to the fourth position as compared to last years sixth and the power sector improved by two positions to end up at fifth. The Supreme Court starting with the NRO, has so far taken suo moto action in at least half a dozen cases of corruption and recovered billions of rupees plundered by those holding official positions. Be it NICL, Steel Mills, PIA, WAPDA, Railways, KESC, the officials concerned have ruthlessly looted the national wealth. Although government functionaries spend much of their time paying lip service, maintaining they respect the Supreme Court, its decisions are far from being implemented. Instead, the government has chosen to adopt a defiant attitude. The question is that if ministers and secretaries are found to be involved in corruption scandals, then who will guard the guards? A federal minister and a director general Haj are languishing in jail on serious charges. The same minister has gone so far as to accuse the Prime Ministers son of accepting a very expensive automobile as graft. Another federal minister returned millions of rupees to save his skin. Yet another former federal minister is accused of accepting huge funds
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for granting contracts to a foreign firm for producing electricity. The examples of governance go from bad to worse. And yet the president, in his speech at Garhi Khuda Bukhash, claimed having implemented 80 per cent of his party manifesto and the Prime Minister speaking on the floor of the National Assembly declared that all his pledges for the welfare of the people had been fulfilled. An unsettling claim to have made given the state of affairs.
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the UGC is in addition to the states financially supporting university budgets, and in some cases providing up to 80 percent of the university budgets. Nine new prestigious IITs have been established in the last three years in addition to the seven original ones. Indias political leadership is sending out all the right signals. India has a Knowledge Commission headed by a world-renowned expert serving as an adviser to the Prime Minister; a ministry of human resource development, and a strong and centralized UGC. Recently, the Indian cabinet approved setting up the National Commission on Higher Education and Research (NCHER), following the HEC Pakistan model. Pakistan must invest foremost in education with renewed vigor. The lower education must focus on improving quality, while the HEC must be supported to raise Pakistans knowledge workers level to world standards. Any other direction will be suicidal for Pakistans education. The writer is chairman of Pakistans Higher Education Commission. Email: jlaghari@hec. gov.pk.
International News
ACFE News (www.acfe.com) The 10 Tell-Tale Signs of Deception the Words Reveal
Suspects and witnesses often reveal more than they intend through their choices of words. Here are ways to detect possible deception in written and oral statements. The manager of a fast food restaurant calls the police late at night to report that an armed robber had entered the restaurant while the manager was alone in the office finishing some paperwork. The manager said the gunman had stolen the entire day's cash receipts a little more than $4,000. The manager had reported a similar robbery at the restaurant about six months earlier. No other witnesses were present at either alleged robbery. The restaurant owner learns from police investigators that armed robbery is extremely unusual in the surrounding neighborhood. Also, the owner knows that the manager's wages have been garnished for the last year for nonpayment of child support. The owner hires you, a FA/CFE, to investigate whether the manager is filing false police reports to cover his thefts. You begin your investigation by asking the manager to write a description of the evening's events.
DETECTING ANOMALIES
Linguistic text analysis involves studying the language, grammar and syntax a subject uses to describe an event to detect any anomalies. Experienced investigators are accustomed to studying interview subjects' nonverbal behavior, such as eye contact and hand movement. Text analysis, on the other hand, considers only the subject's verbal behavior. Because text analysis evaluates only the subject's words, investigators can apply it to written as well as oral statements. In fact, many investigators prefer to analyze suspects' written statements for signs of deception before conducting face-to-face interviews. Text analysis is based on research originating in the 1970s. Psychologists and linguists studied the language and word choices of subjects in controlled experiments and found predictable differences between truthful and deceptive statements. Susan Adams, an instructor who taught text analysis (which
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she called statement analysis) at the FBI Academy for many years, described it as a two-part process ("Statement Analysis: What Do Suspects' Words Really Reveal?" FBI Law Enforcement Journal, October 1996). First, investigators determine what is typical of a truthful statement. Secondly, they look for deviations from the norm. The following section describes deviations that suggest a subject may be withholding, altering or fabricating information.
2. Verb tense
Truthful people usually describe historical events in the past tense. Deceptive people sometimes refer to past events as if the events were occurring in the present. Describing past events using the present tense suggests that people are rehearsing the events in their mind. Investigators should pay particular attention to points in a narrative at which the speaker shifts to inappropriate present tense usage. Consider the following statement made by an employee claiming that a pouch containing $6,000 in cash was stolen before she could deposit it at the bank (I have emphasized certain words.): "After closing the store, I put the cash pouch in my car and drove to the Olympia Bank building on Elm Street. It was raining hard so I had to drive slowly. I entered the parking lot and drove around back to the night depository slot. When I stopped the car and rolled down my window, a guy jumps out of the bushes and yells at me. I can see he has a gun. He grabs the cash pouch and runs away. The last I saw him he was headed south on Elm Street. After he was gone, I called the police on my cell phone and reported the theft." The first three sentences describe the employee's drive to the bank in the past tense. But the next three sentences describe the alleged theft in the present tense. An alert investigator might suspect that the employee stole the day's cash receipts, then drove to the bank and called the police from the bank parking lot to report a phony theft. (See another example in "Antics with Semantics" at bottom.) 3. Answering questions with questions Even liars prefer not to lie. Outright lies carry the risk of detection. Before answering a question with a lie, a deceptive person will usually try to avoid answering the question at all. One common method of dodging questions is to respond with a question of one's own. Investigators should be alert to responses such as: "Why would I steal from my own brother?" "Do I seem like the kind of person who would do something like that?" "Don't you think somebody would have to be pretty stupid to remove cash from their own register drawer?"
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4. Equivocation The subject avoids an interviewer's questions by filling his or her statements with expressions of uncertainty, weak modifiers and vague expressions. Investigators should watch for words such as: think, guess, sort of, maybe, might, perhaps, approximately, about, could. Vague statements and expressions of uncertainty allow a deceptive person leeway to modify his or her assertions at a later date without directly contradicting the original statement. Noncommittal verbs are: think, believe, guess, suppose, figure, assume. Equivocating adjectives and adverbs are: sort of, almost, mainly, perhaps, maybe, about. Vague qualifiers are: you might say, more or less. 5. Oaths Although deceptive subjects attempt to give interviewers as little useful information as possible, they try very hard to convince interviewers that what they say is true. Deceptive subjects often use mild oaths to try to make their statements sound more convincing. Deceptive people are more likely than truthful people to sprinkle their statements with expressions such as: "I swear," "on my honor," "as God is my witness," "cross my heart." Truthful witnesses are more confident that the facts will prove the veracity of their statements and feel less need to back their statements with oaths. 6. Euphemisms Many languages offer alternative terms for almost any action or situation. Statements made by guilty parties often include mild or vague words rather than their harsher, more explicit synonyms. Euphemisms portray the subject's behavior in a more favorable light and minimize any harm the subject's actions might have caused. Investigators should look for euphemistic terms such as: "missing" instead of "stolen," "borrowed" instead of "took," "bumped" instead of "hit," and "warned" instead of "threatened."
7. Alluding to actions
People sometimes allude to actions without saying they actually performed them. Consider the following statement from an employee who was questioned about the loss of some valuable data: "I try to back up my computer and put away my papers every night before going home. Last Tuesday, I decided to copy my files onto the network drive and started putting my papers in my desk drawer. I also needed to lock the customer list in the office safe." Did the employee back up her computer? Did she copy her files onto the network drive? Did she put her papers in the desk drawer? Did she lock the customer list in the office safe? The employee alluded to all these actions without saying definitively that she completed any of them. An attentive investigator should not assume that subjects perform every action they allude to.
8. Lack of Detail
Truthful statements usually contain specific details, some of which may not even be relevant to the question asked. This happens because truthful subjects are retrieving events from long-term memory, and our memories store dozens of facts about each experience the new shoes we were wearing, the song that was playing in the background, the woman at the next table who reminded us of our thirdgrade teacher, the conversation that was interrupted when the fire alarm rang. At least some of these details will show up in a truthful subject's statement. Those who fabricate a story, however, tend to keep their statements simple and brief. Few liars have sufficient imagination to make up detailed descriptions of fictitious events. Plus, a deceptive person wants to minimize the risk that an investigator will discover evidence contradicting any aspect of his or her statement; the fewer facts that might be proved false, the better. Wendell Rudacille, the author of "Identifying Lies in Disguise" (Kendall/Hunt, 1994), refers to seemingly inconsequential details as "tangential verbal data" and considers their presence to be prime indicators that subjects are telling the truth.
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9. Narrative balance
A narrative consists of three parts: prologue, critical event and aftermath. The prologue contains background information and describes events that took place before the critical event. The critical event is the most important occurrence in the narrative. The aftermath describes what happened after the critical event. In a complete and truthful narrative, the balance will be approximately 20 percent to 25 percent prologue, 40 percent to 60 percent critical event and 25 percent to 35 percent aftermath. If one part of the narrative is significantly shorter than expected, important information may have been omitted. If one part of the narrative is significantly longer than expected, it may be padded with false information. The following statement, filed with an insurance claim, is suspiciously out of balance: "I was driving east on Elm Street at about 4:00 on Tuesday. I was on my way home from the A&P supermarket. The traffic light at the intersection of Elm and Patterson was red, so I came to a complete stop. After the light turned green, I moved slowly into the intersection. All of a sudden, a car ran into me. The other driver didn't stop, so I drove home and called my insurance agent." The subject's statement contains four sentences of prologue, only one sentence describing the critical event, and only one sentence of aftermath. The prologue contains a credible amount of detail: the day and time of the accident, the driver's destination, and the location of the accident. But the description of the critical event (i.e., the alleged accident) is suspiciously brief. The claimant did not describe the other vehicle, which direction it came from, how fast it was going, whether the driver braked to try to avoid the accident or how the two vehicles made contact. The aftermath is also shorter than one would expect from a complete and truthful account of a two-car accident. The claimant does not say which direction the other vehicle went after leaving the scene of the accident. He does not mention getting out of his vehicle to inspect the damage nor does he say whether he spoke to any people in the area who may have witnessed the accident. A claims adjuster receiving such a statement would be wise to investigate whether the policyholder concocted a phony hit-and-run story to collect for damages caused by the driver's negligence.
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concerted effort to pull everything together and move forward aggressively to address these issues." He said the new unit, part of the existing federal Financial Fraud Enforcement Task Force, would go after "every aspect of the conduct that created the bubble and crash," including the origination of mortgages and the packaging of them into securities. Obama announced the new effort in Tuesday's State of the Union address. "This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans," Obama said. Schneiderman has been one of the most aggressive state attorneys general in investigating the actions of financial firms and others leading up to the housing bust. Along with California Atty. Gen. Kamala D. Harris, Schneiderman and several other attorneys general have balked at the ongoing talks between state officials and large mortgage servicers to settle investigations into foreclosure process abuses. Schneiderman said Wednesday that the new unit's efforts shouldn't affect the foreclosure settlement talks because those investigations deal with conduct that took place after the housing market collapsed. "The multi-state talks all relate to post-crash conduct. These are abuses in the foreclosure process," he said. "Our working group is focusing on the conduct related to the pooling and creation of mortgage-backed securities...the conduct that created the crash, not the abuses that happened after the fact." An earlier version of this post said New York Atty. Gen. Eric Schneiderman will lead a new Financial Fraud Enforcement Task Force to coordinate investigations into the mortgage crisis. Schneiderman will co-chair a new unit focused on mortgage-backed securities abuses leading up to the housing market bust. The unit will be part of the existing federal Financial Fraud Enforcement Task Force.
Real Empire
Mr. Stanfords financial empire was real and did make a lot of money and did pay every penny of what was owed to depositors for 22 years, Robert Scardino, one of Stanfords court-appointed lawyers, told the jury in his own opening remarks. Scardino and defense lawyer Ali Fazel have previously said they will use the records of Houston-based Stanford Group Co. and Antigua-baed Stanford International Bank Ltd. to prove their client never intended to defraud anyone. No investor lost money until the SEC sued Stanford and obtained a court order to take control of his businesses in February 2009, the defense has said. Costa called the $7 billion in deposits once held by Stanfords Antigua bank a real number. How did Mr. Stanford get so many people to give him so much of their savings? Costa asked. Thats where the lying comes in. Stanford lied to depositors about the liquidity of their investments, about whether his bank ever loaned those proceeds and about who was managing their money, the prosecutor said.
Compound Fraud
Youre going to see the power of compound fraud, he said. The financier lied about committing $700 million of his own money to shore up the banks finances in 2008, while he was actually pulling money out, Costa said. Stanford also waved his magic wand to increase the value of an unimproved island
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property from $63 million to $3 billion during the worst economic downturn since the Great Depression, according to the prosecutor. The financier is accused of bribing his now-dead auditor and an Antiguan banking regulator who received cash, National Football League Super Bowl championship tickets and use of Stanfords private jets. Costa told jurors they would hear from investors who lost their life savings. These witnesses will tell how his lying stealing and bribing have taken that money and the dreams they had with it. Complete Picture Scardino told jurors the U.S. didnt have full access to Stanfords business records and wasnt presenting a complete picture of his clients business. He said Stanford invested more than $100 million to improve the island and obtain licenses that made the property more valuable. The defense lawyer called his client a Texas boy and a very resourceful businessman who became a billionaire. He said the jury may hear from his client during the trial, without being more specific. Stanfords lawyer told the panel that the certificates of deposit sold by the Stanford bank werent securities and that Stanfords clients had no say over how their money was invested. The banks CDs were sold only in tranches valued at $50,000 or more, to investors with either a net worth of more than $1 million or an annual income of more than $200,000, the defense lawyer said. Scardino called those CD purchasers sophisticated investors whom he said know what a CD was and what it wasnt.
Legitimate Business
They also received promotional materials from Stanfords business disclosing that past performance was no guarantee of future success and that an investor could lose the entirety of an investment. Were going to prove this was not a Ponzi scheme at all, Scardino said. Unlike frauds in which money from later- arriving investors is used to pay off earlier speculators, he said, this one was legitimate. Marc Nurik, a Fort Lauderdale, Florida, attorney who has been following the Stanford proceedings, called the defense decision to hold out the prospect of Stanfords testimony a risk. Stanford isnt required to take the witness stand. The traditional wisdom is that you dont set up for failure, he said. An opening statement is tantamount to the making of a promise to the jury, he said. Stanfords failure to take the stand would breach that promise. Nurik said Stanford might be pressing his lawyers to let him testify.
Jury Selection
Jury selection began Jan. 23 at Houstons Bob Casey Federal Courthouse with U.S. District Judge David Hittners interview of 80 prospective panelists, many of whom said they had read or heard reports about the case and some of whom told the judge they didnt know if they could be impartial. The 15 men and women selected yesterday include a retail optician, an environmental engineer, two accountants, a kindergarten teacher, a chef, a land surveyor, a pawn broker and a retired hairdresser. The trial may last about six weeks, Hittner said. In Washington, SEC lawyers asked U.S. District Judge Robert Wilkins during a hearing yesterday to require SIPC, a nonprofit corporation funded by the brokerage industry, to start a liquidation proceeding in federal court in Texas to handle more than $1 billion in possible claims related to the alleged Stanford fraud.
Judicial Review
Ultimately, what were seeking here is to provide a forum where claimants can seek judicial review of their claims, Matthew Martens, the SECs chief litigator, told the judge during a three-hour hearing. At issue is whether more than 7,000 brokerage customers who invested in the alleged Ponzi scheme run by Stanford are entitled to have their losses covered by SIPC. SIPC, a congressionally chartered group that insures customers against losses caused by broker theft, says the Stanford investments dont fit into the confines of the federal law that governs whos eligible for the payouts. Investors and their advocates in Congress say SIPC is deliberately taking a narrow view of the law to protect brokers from higher assessments. In June, the SEC ordered SIPC to start a process that could grant as much as $500,000 for each Stanford client -- the same maximum amount it offers in any case. After SIPC balked, the SEC for the first time sued the group in federal court in Washington.
Individual Investors
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SIPC is responsible for providing coverage for individual investors who lose money or securities held by insolvent or failing member brokerage firms. It has agreed to cover losses sustained by victims of Bernard Madoffs multibillion-dollar Ponzi scheme and investors who may have lost money in the October collapse of commodities broker MF Global Holdings Ltd. SIPC doesnt guarantee an investments value or protect against fraud, the agency said in court papers. It also doesnt cover investments with offshore banks or non-member firms. Stephen Harbeck, SIPCs president, has said that SIPC shouldnt get involved in the Stanford case because investors received actual CDs after the brokerage passed their money to a bank. What happened after that isnt under SIPCs purview because the Stanford account holders have possession of their securities, he told a court-appointed receiver in 2009. The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The civil case against Stanford is Securities and Exchange Commission v. Stanford International Bank Ltd., 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The SIPC case is Securities and Exchange Commission v. Securities Investor Protection Corp., 11-mc-00678, U.S. District Court, District of Columbia (Washington).
The Institute of Money Laundering Prevention Officers (www.imlpo.com) (Latest AML & Financial Crime News)
FSA fines former compliance officer 130,000
The FSA has fined Greenlight Capital trader and compliance officer Alexander Ten-Holter 130,000 for failing to make "reasonable" enquiries before being ordered to sell the firm's shareholding in Punch Taverns. He has also been banned from performing compliance and oversight and money laundering reporting functions, after the regulator found he had not made any enquiries into whether the call had been made because of the receipt of insider information. More on the Money Marketing website here.
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Confiscation Orders and 16.3 million to Cash Forfeiture Orders awaiting forfeiture under the Proceeds of Crime Act 2002. More on info4security.com here.
Four arrested in investigation into money laundering and corruption in the UK armed forces
Three former British military officers have been arrested in the biggest-ever Armed Forces corruption probe. Two key ex-RAF personnel, a former Army reservist and a British businessman are among those to be questioned over an investigation into money laundering and corruption. The probe centers on claims as much as 50million of British and American taxpayers' money is thought to have been paid in exchange for engineering works at an Afghan airbase. More on the Daily Mirror (!) website here.
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helpline which provides confidential information and guidance to people facing ethical dilemmas or reporting concerns about possible fraud, abuse of power or corruption. Its chief executive, John Devitt, says many callers to the Speak Up service are whistleblowers who fear that if they share their concerns with their employers they may lose their jobs. Our helpline volunteers are dealing with distressed callers who wish to speak up in the public interest but are unsure of their rights and responsibilities and what protection is in place for them, he said. The government has committed itself to a single law protecting people who come forward to report wrongdoing, which we see as long overdue given the succession of scandals that have emerged from our banks, the public sector and church. The cost of silence to Irish society is incalculable. We will welcome any new law that offers full protection to whistleblowers across the private and public sectors and any future law should clearly place the onus on employers to show that they have not retaliated against employees who speak up. However, employers do not need to wait for a whistleblower protection bill to be introduced we would urge all employers to show leadership in protecting workers who speak up in public interest. The State ethics watchdog, the Standards in Public Office Commission, has stated that the Governments current approach to whistleblower protection is deeply flawed and that the current piecemeal approach to introducing protection for whistleblowers may have created confusion. The agency has also questioned whether there is a real commitment to encouraging people to come forward in reporting wrongdoing. A TI Ireland report on whistleblower protection in Ireland published last year found that while safeguards had been included in individual pieces of legislation, people across the public and private sectors can still face legal and disciplinary action for honestly reporting concerns to their employers or the authorities. There is no legal safeguard for employees in the banking sector, while the only state agency that provides blanket guarantees to whistleblowers is FS. The authorities in Britain and Northern Ireland have offered blanket protection to employees there under a single whistleblower law since 1998.
84 recommendations for more integrity: Transparency Germany presents its National Integrity System assessment for Germany
The anti-corruption organization Transparency Germany today released its National Integrity System assessment for Germany. The report examines the current state of anti-corruption reform in the Federal Republic of Germany. It rates 13 institutions, basing its assessments on their financial and personal resources, the anti-corruption measures put in place, and their overall contribution to the fight against corruption in Germany. Germany generally receives goods to very good marks for the prevention and punishment of corruption. The federal structure of Germany provides numerous control mechanisms that can prevent abuses of power. In addition, no state or non-state body is limited in its independence to an unacceptable degree. Almost all the institutions examined are well-equipped with personnel and financial resources.
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Background
Kevin Steele was a partner at London law firm Mishcon de Reya. Michael Shephard who purported to be a wealthy businessmen was one of his clients. Mark Pattinson was an associate of Shephard's. Engaged by him to assist in the dishonest venture. Together they conspired to produce letters purporting to be from Bank Julius Baer & Co in Guernsey. The false documents were presented to EFG Private Bank in order to support a loan application on behalf of Michael Shephard. The documents contained a claim that over 76 million was held in two Guernsey accounts and available for use as security on the 22 million loan. The claimed purpose of the loan application was for property developments in Turkey. The SFO investigation commenced in November 2008, and was supported by Warwickshire Constabulary, following their initial enquiry. Charges were brought against all three in June 2009. Shephard and Pattinson pleaded guilty ahead of trial, which opened on 7 November, to conspiring to use false instruments contrary to section 1(1) of the Criminal Law Act 1977 and section 3 of the Forgery and Counterfeiting Act 1981. They pleaded guilty also to conspiracy to commit fraud by false representation contrary to section 1(1) of the Criminal Law Act 1977 and section 1 of the Fraud Act 2006. Steele denied the charges against him but was convicted of the same offences on 5 December 2011. Additionally he was found guilty of fraud contrary to section 1 of the Fraud Act 2006 in that he exposed another, (Michcon de Reya) to risk of loss, he abused his position as partner in a law firm in which he was expected to protect the financial interests of the firm.
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of privileged positions with the simple aim of making money illegally." Commenting on the outcome, SFO Director Richard Alderman said, "Corruption in business life diminishes society. Today's outcome makes it clear that it will not be tolerated. The investigation is an excellent example of collaboration between the City of London Police and the SFO. Each of us used our particular powers and skills, combined in a complex case with significant international links"
Summary
The confidential information supplied to bidders was held by companies acting as procurement agents for the projects. It is an industry where individuals who work for such companies often do so on a short term basis. Crucially, the defendants had access to inside information which they passed on to targeted bidding companies who either made, or agreed to make, corrupt payments for the information. Disguised as "consultancy services", the illicit payments were shared out amongst the co-conspirators.
The Projects
The investigation began in April 2008 as a joint operation between the Serious Fraud Office and the City of London Police. It followed a report of a suspicious approach to a bidding company. Investigators subsequently uncovered suspected corruption in a number of other similar contracts and identified the above-named defendants as being involved. The trial focused on five projects: Styrene Monomer Project, Iran: Snamprogetti Ltd, a company in Basingstoke, was appointed to provide procurement services to Pars Petrochemical Company for the construction of a styrene monomer plant in Bandar Assaluyeh, Iran. (Styrene monomer is a chemical commonly used in the manufacture of disposable transparent containers). Saunders was engaged by Snamprogetti Ltd as an agency worker between 2001 and 2003. He passed inside information about the splitter column element of this contract (valued at nearly 1 million) to Hammond and Rybak, who were co-directors of Strategic Project Services Ltd (a corporate vehicle for their purported consultancy services). Confidential information was relayed to a bidding company, Walter Tosto Serbatoi S.p.A., which agreed to pay SPS 3% plus a split of any uplift when the contract, which totalled approximately US$100,000, was awarded. The payment was then distributed between the defendants. QASR Gas Gathering Project, Egypt. In 2004 and 2005, J P Kenny, a company based in Staines, provided procurement services to Khalda Petroleum Company for the development of the QASR gas fields in Egypt. One element of the contract was a generator package valued at nearly 3 million. Saunders, together with another man (see note 1), was engaged by J P Kenny as a contractor from 2005 to 2007. Saunders supplied confidential information to Rybak for the benefit of a bidding company Mantrac Egypt and its subcontractor Impianti e Technolgie do Processo S.r.L. When the contract was awarded, Rybak received over a quarter of a million US dollars, part of which was then passed onto Saunders. Sakhalin Island Project. This is one of the largest integrated oil and gas projects in the world and involves the exploration and development of several different oil and gas fields in the Sea of Okhotsk off Sakhalin Island (part of the Russian Federation). Fluor Ltd, a company in Farnborough, managed the procurement process for this project. A number of separate packages were investigated in detail, including: air compressors, oil pumps, generator sets, gas turbines, equipment to treat fuel gas, oily water treatment and large bore pipes. These packages were worth over 17 million. Saunders and another man were engaged as contractors by Fluor Limited between 2006 and 2008. Again, Rybak and Hammond received confidential information from the insiders which they sold on to bidding companies. Some payments of around 357,000 and US$229,000, were made from successful bidders, which were then distributed between the defendants. Singapore Parallel Train Project. In August 2005, Foster Wheeler Worley Parsons, a joint venture in Reading, was awarded the Singapore Parallel Train procurement contract. The other man was again employed as a buyer (from 2007 to 2008). On three parts of the project (waste water treatment, demineralized water and carbon bed filters worth around US$35m), he passed confidential information to Rybak and Hammond which was then offered to bidders Ecodyne Ltd (a Canadian company) and
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Ondeo Industrial Solutions SarL (based in France), who agreed to pay commission if awarded the contracts. GE Water & Process Technologies Ltd, another bidder corruptly approached by Rybak (using a false name), rejected the approach and reported it to the procurement company, which then led to the City of London Police and the SFO being called in. Hydrogen Power Project, Abu Dhabi. In 2008 Foster Wheeler was engaged by Masdar (Abu Dhabi Future Energy Company) and Hydrogen Energy International (based in Weybridge) to provide engineering and procurement services for the construction of the Hydrogen Power Abu Dhabi power plant. Both Rybak and Saunders were engaged by Hydrogen Energy as contractors between 2008 and 2009, and 2008 respectively. In relation to the steam turbine generator package, a contract valued at over US$42 million, corrupt approaches were made to bidders by Hammond (also using a false name). In addition, Rybak and Saunders brought Barry Smith into the conspiracy to assist with recruiting an Abu Dhabi agent for Italian bidding company Franco Tosi Mecannica S.p.A., which in turn entered into an agency agreement, the payment of which in turn was to be distributed between the defendants. The SFO alleged that Robert Storey was also involved in this conspiracy.
Proceedings
The companies that provided procurement services for these projects helped the investigation enormously. They were appalled at the apparent blatant disregard shown by these defendants for the confidentiality and integrity of the project environments. Our investigators sifted huge quantities of evidence including mobile phone data, travel records and e-mails, which identified and established the involvement of these defendants. Charges were brought against them in September 2010. The trial opened at Southwark Crown Court on 10 October 2011. The jury was sent out on 10 January 2012. Sentencing has been adjourned until 30 January. Confiscation proceedings will be instigated.
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accounting loss for the year of around NZ$30 million. SFO Chief Executive Adam Feeley said that the further charge by Hong Kong authorities was consistent with the evidence SFO investigations had uncovered. The further charge reinforces our initial view as to the best options for law enforcement. We concur with the additional action being taken by ICAC, and believe that our law enforcement efforts can be most effectively applied to supporting the ICAC case through the evidence of SFO forensic accountants involved with the investigation. On 17 October 2011, May Hao (formerly known as May Wang), the former operator of UBNZ Assets Holdings Limited (UBAH), was charged by ICAC with one count of conspiracy to offer advantages to an agent and two counts of dealing with property known or reasonably believed to represent proceeds of a crime. Chen Keen (also known as Jack Chen) was charged in Hong Kong on 21 October 2011 with one count of conspiracy to offer advantages to an agent and one count of dealing with property known or reasonably believed to represent proceeds of a crime. May Hao and Chen Keen also re-appeared in court yesterday. Mr. Yee is alleged to have conspired with May Hao and Chen Keen in misrepresenting the financial strength of the Crafar farms. Natural Dairy is listed on the Main Board of the Stock Exchange of Hong Kong but trading has been suspended since 7 September 2010. The charges follow a joint investigation into the company undertaken by the Serious Fraud Office (SFO) in New Zealand and ICAC in Hong Kong. The SFO commenced its investigation in September 2010 when the Natural Dairy bid to purchase the Crafar farms in 2010 was being assessed by the Overseas Investment Office (OIO). ICAC opened a separate investigation into Natural Dairy after receiving an allegation of corruption. Mr. Feeley said that the case underscored the increasing importance of sharing evidence and resources with overseas law enforcement agencies. I think it is unlikely either agency would have progressed this case as effectively without the joint investigative efforts which occurred, and it is likely to become an increasing feature of our cases in the coming years. Mr. Feeley said that the SFO had preliminary discussions with a number of specialist overseas financial crime agencies last year, and hoped to advance those discussions into formal intelligence and information sharing arrangements in 2012. The case against Mr. Yee has been adjourned to 18 April 2012. The case against May Hao and Chen Keen has also been adjourned to 18 April 2012.
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was subsequently referred to the SFO in March 2011. Mr. Nitschke will reappear in the Feilding District Court for sentencing on 20 February 2012.
IFAC Posts Call for Nominations for Boards and Committees in 2013
The International Federation of Accountants (IFAC), the global organization for the accountancy profession with members and associates in 127 countries, has issued an announcement to alert its members, Forum of Firms, other international organizations and the general public of its Call for Nominations for IFAC Boards and Committees in 2013. For the first time, all vacancies on the public interest activity standard-setting boards* are open for nominations by the public. This change is due to IFACs determination to ensure a transparent approach to filling available positions, while also achieving gender, regional, and professional balance, and is in response to the Monitoring Groups 2010 effectiveness review of the IFAC Reforms. The caliber of the volunteer members on our boards and committees is what makes these groups so effective. That is why seeking high-quality nominations is at the core of our nominations processes, said IFAC President Gran Tidstrm. We aim to attract a wide variety of high-quality nominations, to ensure that we have a rich pool from which to find the right candidate for each position. We thank our member bodies and the public in advance for the thoughtful and valuable nominations we anticipate receiving this year. Both the Call for Nominations and its companion guide Developing a Nominations Strategy are designed to help IFAC stakeholders identify the most qualified person for nomination to each available position on the boards and committees. These in-depth documents, located on the IFAC website, contain strategic and practical advice for nominating organizations and other individuals that allows them to make more informed decisions in their selections and decisions, and to understand the requirements of the various positions. Each year, approximately one-third of the 155 positions on the boards and committees have openings, though, for some of those positions, serving members may be reappointed. In addition, this year, the position of the IFAC Deputy President is open for nominations from member bodies. For more information about the Nominating Committee, its due process, or for guidance in selecting the best candidate, please visit the
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IFAC website. All applications should be submitted before March 15, 2012 electronically via IFACs nominations database; instructions are provided on page six of the Call for Nominations.
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The International Auditing and Assurance Standards Board (IAASB) today released a Feedback Statement on the responses to its January 2011 Discussion Paper, The Evolving Nature of Financial Reporting: Disclosure and Its Audit Implications. The Discussion Paper solicited views and perspectives of different stakeholder groups on the challenges arising as financial reporting continues to evolve to meet the changing needs of users. Respondents from across the world, including regulators and oversight authorities, users and preparers, audit firms, and professional bodies provided thoughtful and informative input on issues around disclosures. The Feedback Statement provides an overview of the key messages heard and provides thoughts and recommendations on what can be done to address them. Disclosures have always been a critical component of financial reporting, but have become more so today as reporting increasingly incorporates fair value information, estimates involving judgment and complex measurements, and narrative disclosures of some of the risks and characteristics of companies and groups. Accordingly, investors and others look to disclosures for vital insights when making investment decisions, said Prof. Arnold Schilder, Chairman of the IAASB. This underscores the importance of the IAASBs initiative to gain further knowledge and understanding of the issues and share what it has heard to stimulate further thinking and exploration in this area. The Feedback Statement presents a summary of the range of views on some of the more significant challenges faced by participants across the entire financial reporting supply chain, including the impact of trends in financial reporting, applying materiality to disclosures, evaluating misstatements generated by disclosures, the availability of audit evidence to support disclosures, and work effort. To address some of the issues identified respondents have called for more auditing guidance in certain identified areas. However, the majority of the respondents were of the view that some of the more important issues could not be addressed by the IAASB on its own, but would require international collaboration and cooperation, particularly with both the accounting standard settersincluding the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB)and regulators. Financial information that is reliable, understandable, and relevant is essential, as is the assurance on that information that auditors provide. We wholeheartedly agree with the respondents regarding the need for international collaboration and cooperation among standard setters; securities, audit, and prudential regulators; and other stakeholders. We must work together to develop effective responses to the issues being faced today, notes James Gunn, IAASB Technical Director. Like others, the IAASB has a role in enhancing the publics confidence in disclosures as a priorityrecognizing that individual initiatives must be towards finding a collective solution.
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Hoogervorst said: When IFRS 9 was introduced in 2009 we said that further amendments might be required once the direction of travel on insurance contracts became clear. We are now at that point. At the same time, this limited-scope review now presents an ideal opportunity to align IFRS and US GAAP more closely, in this important area of financial reporting. We will proceed with caution, recognizing the investment that many jurisdictions have made in preparing for the introduction of IFRS 9 in 2015. FASB Chairman Leslie F. Seidman said: The boards have been urged to converge their standards on financial instruments. Today's decision to work together on key differenceswhich represent the most significant remaining differences between the decisions reached to dateis responsive to stakeholders in the US and abroad. The boards will share the feedback they have received on their respective decisions and strive to develop a more closely converged approach that addresses those concerns. The boards will continue to develop a common approach on impairment of financial assets, which is being handled as a separate work stream. As part of their project on financial instruments, the FASB is proposing enhanced disclosures about interest rate risk and liquidity, which under IFRS are covered by IFRS 7, Financial Instruments: Disclosures.
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Chairman of the Trustees and the Chairman of the IASB. Commenting on the appointment, Michel Prada, Chairman of the Trustees said: Yaels track record speaks for itself. Her extensive international contacts and deep knowledge of matters related to IFRSs means that she will be able to hit the ground running. Hans Hoogervorst, Chairman of the IASB said; I worked with Yael during our time at IOSCO and was impressed with her ability to work well with her international colleagues and achieve results. She will be a tremendous asset to the organization. Yael Almog said: This is an exciting challenge for me both professionally and personally. I have always strongly supported the mission of the IFRS Foundation and I am honored and proud to join the organization and to contribute my share to achieving its goals.
IFRS Foundation Trustees and representatives from the Singapore Accounting Standards Council and local business community meet to discuss financial reporting matters
The Trustees of the IFRS Foundation, responsible for the governance and oversight of the International Accounting Standards Board (IASB), met with representatives of the Singapore Accounting Standards Council (ASC) and the local business community on 12 January 2012. The participants exchanged views on the work of the Trustees and the IASB to establish International Financial Reporting Standards (IFRSs) as the globally accepted language for financial reporting, as well the practical challenges faced by Singapore companies in implementing IFRSs. IFRSs are required or permitted for use by companies in more than 100 countries, including most of the G20. Singapore has been a long-term supporter of the development of a single set of global accounting standards. Singapore Financial Reporting Standards (SFRSs) are already substantially aligned with IFRSs and the ASC is working towards full convergence of those standards. The Trustees and the leadership of the IASB expressed a commitment to support this work. The meeting was jointly led by Mr. Michael Lim, Chairman of the ASC and Mr. Michel Prada, the newly appointed Chairman of the IFRS Foundation Trustees. Commenting on the meeting, Mr. Michael Lim said: Singapore is committed to full convergence, and will continue to actively contribute and collaborate with the Foundation and IASB to develop global accounting standards. In completing our review of the status of convergence implementation, the ASC concluded that Singapore remains on track for full convergence of the SFRSs with the IFRSs, taking into consideration the progress of the IASBs priority projects. Mr. Michel Prada said: On behalf of the Trustees, I would like to thank the Singapore Accounting Standards Council for organizing a very productive meeting with senior representatives of the Singapore business community. Singapore is a major financial centre and an important stakeholder in our work to establish IFRSs as a global financial reporting language. The meeting follows a separate two-day meeting of the Trustees in Singapore on 11 and 12 January 2012. A summary of the conclusions of the Trustees meeting will be published shortly on the IFRS Foundation website (www.ifrs.org).
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IASB and FASB Seek to Reduce Differences in Classification and Measurement Models for Financial Instruments
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) today agreed to work together to seek to reduce differences in their respective classification and measurement models for financial instruments. The discussions will form part of the FASBs ongoing redeliberation of a proposed Accounting Standards Update on financial instruments, which was originally issued in May 2010. The IASB will consider these discussions as part of its project to undertake limitedscope changes to IFRS 9, Financial Instruments, issued in November 2009 and amended in October 2010, resulting from its ongoing work to develop a new IFRS on insurance contracts and the feedback received on application of IFRS 9 to particular instruments.
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intangible asset unless the organization determines, based on a qualitative assessment, that it is more likely than not that the assets fair value is less than its carrying amount.
NASBA and AICPA Give Final Approval to Revisions to Continuing Professional Education (CPE) Provider Standards
The Boards of Directors for both the National Association of State Boards of Accountancy (NASBA) and the American Institute of Certified Public Accountants (AICPA) today announced final approval of the proposed revisions to the Statement on Standards for Continuing Professional Education (CPE) Programs (Standards), the framework for the development, presentation, measurement and reporting of CPE programs. The approval comes following a collaborative analysis of the Standards by a joint
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AICPA/NASBA CPE Standards Committee and an extended public comment period of the Standards exposure draft. Overall, the submitted comments did not result in major changes or revisions to the Exposure Draft of the Standards. The most significant change to the Exposure Draft was to provide additional time on the front end for the implementation of the revised Standards.
New Conference Offers Strategies for Dealing with Stepped-Up IRS Scrutiny
Recent government statistics show that the Internal Revenue Service has increased its scrutiny of tax returns and tax professionals, particularly where small business owners or high-wealth individuals are concerned. One IRS priority is to ferret out undeclared interests in foreign financial accounts and assets, which can lead to civil or criminal penalties for taxpayersnot to mention sanctions for practitioners who either fail to report these matters fully or are negligently ignorant of their existence. The bottom line: Tax enforcement is evolving and CPAs and finance professionals must be prepared for a new generation of enforcement tools and techniques. To help meet that goal, the American Institute of Certified Public Accountants is sponsoring a new event this spring, AICPA Conference on Tax Controversy, which will offer strategies for practitioners whose clients face questions or challenges from the IRS.
AICPA Launches eBook Versions of Popular Titles for the Accounting Profession
Audit and accounting guides from the American Institute of Certified Public Accountants have been popular desk reference tools for decades. With many now available as eBooks, theyre perfect for CPAs and finance professionals on the go, too. Digital versions of more than 30 of the AICPAs top-selling titles on accounting and audit guidance and practice management strategies are available for download from the organizations online storefront, www.cpa2biz.com/ebooks. The eBooks are easily navigable, with text that can be searched for key terms or annotated. Best of all, CPAs can assemble an entire reference library in a single, portable device.
AICPA, FOX Financial Planning Network Partner to Help CPAs Expand Offerings
The American Institute of Certified Public Accountants today announced a partnership with Fox Financial Planning Network, a financial services consulting firm in San Diego, to help CPAs add financial planning to their practices. The partnership comes as clients increasingly look to CPAs for broader financial advice. The new program, available through the AICPAs Personal Financial Planning section, provides discounted and customized versions of tools and training for CPA practitioners. CPA firms of all sizes can access on-demand training sessions, a fully documented workflow system and coaching sessions to effectively manage a financial planning practice and guide clients toward their savings, retirement, education and other goals.
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Alexander Bruggen, Scott Jackson, Ranjani Krishhnan and Karen Sedatole Receive AAAs Greatest Potential Impact on Management Accounting Practice Award
The American Institute of Certified Public Accountants (AICPA), Chartered Institute of Management Accountants (CIMA) and the Society of Management Accountants of Canada (CMA Canada) are pleased to announce the recipients of the Greatest Potential Impact on Management Accounting Practice Award for 2012. The first award goes to Alexander Bruggen, Ranjani Krishhnan and Karen Sedatole for their paper, Drivers and Consequences of Short-Term Production Decisions: Evidence from the Auto Industry, published in Contemporary Accounting Research. The second goes Scott Jackson for his paper The Effect of Firms' Depreciation Method Choice on Managers' Capital Investment Decisions, published in the Accounting Review.
New Survey: Saving Takes Priority for Young Adults This Year
Young adults have made saving a priority this year ahead of losing weight, living healthier and other typical New Years resolutions as financial concerns take a toll on their friendships and personal lives, according to a new survey by the American Institute of Certified Public Accountants and the Ad Council. The organizations released the results today to coincide with the launch of a new series of public service advertisements on behalf of their national Feed the Pig financial literacy campaign, which helps 25- to 34-year-olds take control of their finances and add saving to their daily lives. According to the survey, nearly three in four young adults in the Feed the Pig demographic are worried more about personal finances because of todays economy. Asked how those concerns are affecting them, almost half, or 48 percent, said they are socializing less with friends; 38 percent said they are losing sleep; 34 percent said they are distracted at work; and 31 percent said they are short-tempered with family and friends.
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among the areas requiring special attention. Iain Coke, head of ICAEWs Financial Services Faculty, said: The volatile economic environment means financial institutions their auditors and users of the financial reports need to be alert. It will be critical to make sure the financial position of banks is explained properly and understood correctly to maintain confidence in reported information. This year will be particularly difficult. It is impossible to predict the nature, timing or impact of future economic shocks, and it is not the job of accounting to do so. However, clear explanations will mean less nasty surprises for readers of financial reports, which why it is so important it is done properly and scrutinized carefully.
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Global trade drying up, says largest ever economic survey of finance professionals
Leading accountancy bodies join forces to provide powerful insight into challenges facing business; Confidence in the UK is low but higher than in the rest of Western Europe. Finance professionals believe there will be a renewed global economic downturn in 2012 as the largest ever quarterly survey of professional accountants shows that international trade continued to dry up at the end of last year. The latest survey of 3,775 professional accountants, including 1,414 senior executives, from around the world, is the result of the collaboration between two major professional bodies. ACCA (the Association of Chartered Certified Accountants), is the global body for professional accountants and has run the Global Economic Conditions Survey since 2009. It has now joined forces with the Institute of Management Accountants (IMA), the world's largest and most respected US-based association focused exclusively on the management accounting profession, to develop an even more robust and powerful record of the state of the global economy.
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feedback. CIMA has continued to work with quality learning partners to expand CIMAs examination capacity and availability to provide stakeholders with greater choice and flexibility. All ten papers in the professional qualification will again be available in March 2012 in the UK to allow a re-sit opportunity for students, with T4 part B Case Study on PC being available globally for students sitting for the first time as well as for those re-sitting. Due to the continuing success of these additional exam sessions, CIMA is pleased to announce that the Strategic level papers will be available globally for the first time from March 2012. CIMA will continue to look to extend the scope of these exam sessions in the future to benefit all of our stakeholders in an increased number of markets. Students have access to a wide range of free study support resources through the CIMAglobal.com website along with e-magazine Velocity and online community CIMA sphere.
The Associate and Fellow Members of the Institute of Forensic Accountants of Pakistan (IFAP) are entitled to get direct membership of these Fifteen Institutes on reciprocal arrangement basis subject to payment of requisite/transfer fee.
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Objectives of IFAP
The Forensic Accounting (FA) Program offered by The Institute of Forensic Accountants of Pakistan (IFAP) is a Professional Program with the following broad objectives: To improve the ability to develop a framework for Forensic Accounting, Forensic Auditing, Forensic Investigation, Fraud Examination, Financial analysis and to rationally evaluate alternatives for purposes of decision making. To deepen insights into practical applications of Forensic Accounting, Auditing, Forensic Investigation and its allied subjects in a dynamic financial and investment environment. To encourage aspiring Forensic Accountants, Forensic Auditors, Fraud Examiners and Fraud Investigators equip themselves with the latest tools, techniques and mechanisms. To develop contemporary Body of Knowledge (BOK) and skill-set and make them available for those seeking rewarding careers in the financial and investment industry era of globalization.
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Vice President
Dr. Tahir Iqbal Emails: vicepresident@ifap.org.pk, ifap.fapakistan@gmail.com
Secretary
Mr. MBT Khalid Emails: secretary@ifap.org.pk, mbt.khalid@gmail.com, mbt.khalid@ifap.org.pk
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Note:
Articles are welcome from any individual, whether an IFAP member or not. For inclusion on the next issue of The Forensic Accountant, fax or email us articles, case studies, papers, opinion, research or related material: Fax: +92 51 222 0872, or emails:ifap.fapakistan@gmail.com admissions@ifap.org.pk exemption@ifap.org.pk, career@ifap.org.pk, secretary@ifap.org.pk, president@ifap.org.pk, vicepresident@ifap.org.pk
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