LHC rules money laundering proceedings need not await tax cases

September 28, 2026 (MLN): The Lahore High Court has ruled that money laundering proceedings can continue independently of tax disputes, allowing the Federal Board of Revenue’s Directorate General of Intelligence & Investigation Inland Revenue (I&I-IR) to investigate suspected money laundering without waiting for an income tax case to conclude.

A two-member bench comprising Justice Khalid Ishaq and Justice Hassan Nawaz Makhdoom issued the ruling while dismissing petitions challenging the powers and actions of FBR’s I&I-IR, according to the judgment in Writ Petition No. 2928 of 2026 and related cases.

The court held that money laundering is a separate offence and that proceedings under the Anti-Money Laundering Act, 2010, do not have to wait for the conclusion of a tax dispute.

The ruling also establishes that a person can face money laundering proceedings even where there has not been a prior conviction for the underlying offence that allegedly generated the funds.

The court recognized the legal authority of FBR’s I&I-IR to register cases, investigate and prosecute offences under the Anti-Money Laundering Act.

It further held that the Anti-Money Laundering Act, being a special law, takes precedence over general laws and that pending tax disputes cannot be used to stop or delay money laundering proceedings.

The court also clarified that the Supreme Court’s ruling in the Taj International case concerned sales tax assessment and recovery and could not be used to prevent money laundering proceedings.

The judgment also addressed suspicious transaction reports made by banks to the Financial Monitoring Unit (FMU).

According to the ruling, where banks report suspicious transactions to the FMU and subsequent action is taken, such action falls within the legal framework and safeguards prescribed by law.

The court further observed that a writ petition in the High Court would not ordinarily be used to stop a criminal investigation at the preliminary stage.

Questions concerning the origin of funds and how those funds were moved would instead be examined by the relevant Special Courts during proceedings.

FBR welcomed the judgment, saying it provides legal clarity and strengthens efforts against money laundering and financial crime.

The case was pursued under the guidance of Aqeel Ahmed Siddiqui, Director General of I&I-IR.

The ruling provides a clearer separation between tax proceedings and money laundering investigations, allowing the latter to proceed without waiting for the conclusion of a related tax dispute.

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