LHC Allows Money Laundering Cases To Proceed Without Tax Verdict

The Lahore High Court (LHC) has ruled that money laundering proceedings can continue independently of tax cases, holding that the Federal Board of Revenue (FBR) does not have to wait for income tax proceedings to conclude before launching a money laundering investigation.

A two-member bench comprising Justice Khalid Ishaq and Justice Hassan Nawaz Makhdoom announced the judgment in Writ Petition No. 2928 of 2026 and connected cases. The court dismissed petitions challenging the authority and actions of the FBR’s Directorate General of Intelligence & Investigation, Inland Revenue (I&I-IR).

The court held that I&I-IR is legally empowered to register cases, conduct investigations and prosecute offences under the Anti-Money Laundering Act, 2010.

According to the judgment, money laundering and tax proceedings are separate legal matters, meaning neither process is required to wait for the conclusion of the other. The court also held that a person may face money laundering proceedings without first being convicted of the offence that allegedly generated the proceeds.

The LHC observed that the Anti-Money Laundering Act is a special law and therefore takes precedence over general legislation. As a result, ongoing tax disputes cannot be used as grounds to stop or delay money laundering proceedings.

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

The judgment also upheld the legal framework governing suspicious transaction reports submitted by banks to the Financial Monitoring Unit (FMU), along with subsequent action taken on the basis of those reports, subject to prescribed legal safeguards.

The court noted that writ jurisdiction ordinarily cannot be invoked to stop a criminal investigation before its completion. Questions regarding the source and movement of funds, it said, would be examined and decided by the relevant Special Courts.

The FBR welcomed the ruling, stating that it provides greater legal clarity and strengthens efforts against money laundering and financial crimes, while stressing that such proceedings remain subject to due process and the rule of law.