The Anti-Corruption Commission (ACC) started their investigation in the Mini-Dry Port (MDP) after being alerted about the possible existence of bribery and extortion by Customs officials and loaders while importing goods through the MDP and other designated areas in Phuentsholing sometime in June 2021.
The investigation by the ACC was launched at a time when there was heightened concern about the unrelenting surge in COVID cases in Phuentsholing despite being under a strict lockdown.
The investigation revealed prevalence of bribery and extortion practices involving loaders and customs officials at the MDP.
Senior Custom Officer’s bribery Modus Operandi
Of the few suspected involvement of custom officials, one of them is one Senior Custom Inspector who was arrested on 8 October. He had been receiving illicit payments from multiple parties in relation to import of goods. However, the findings have revealed that he concealed these bribes using the bank accounts of other private individuals, which was his modus operandi.
He requested one of his old school mates working at Pasakha, to use his bank account and he convinced his friend saying that he had money to receive from someone in relation to doma, and that he was not comfortable using his own account as it would make law enforcement agencies suspicious.
ACC found that in less than a month, he had collected about Nu 800,000 from four individuals. Every time a deposit was made, the suspect requested his friend to withdraw cash and deliver it to the containment area.
However, after some time, his friend refused to hand over Nu 50,000 to the suspect as he became suspicious of him. The suspect had to discontinue and look for someone more reliable and that’s when he switched to another old school mate who was running a small shop at Pekarzhing.
It was learnt that using this account, the suspect collected about Nu 1.994 mn from as many as 35 individuals or business entities through this account and he invested that money to operate some businesses. There were some occasions when the suspect personally approached and deposited cash with some acquaintance operating small business asking them to transfer the equivalent sum from their account to his cousin in Mongar.
The suspect also used another bank account registered in the name of a retail store, the business account of which was otherwise inactive after the proprietor discontinued the business. The investigation ascertained that about 15 individuals made deposits totaling to more than Nu 470,000 into this account.
This is Nu 3.5 mn in bribes for just one official within a limited time period.
The investigation also discovered that the suspect also shared his friend’s bank account to some of his colleagues in customs to receive bribes.
Online bribes helped ACC
The ACC said that the previous attempt to break into the bribery racket was challenging, and was not so successful as the exchange of bribes were done in cash, but during the pandemic the situation changed.
The entry of goods became regulated and transshipment process made it difficult for importers to evade declarations, said the ACC, adding that as the border was closed and under stringent enforcement of COVID protocols followed by intermittent lockdowns cash transactions became difficult forcing many businessmen to use mobile apps to transfer funds.
“Under the new normal, person to person interface in a containment area was practically not feasible and monetary transfers had to be routed through banks. Covering the tracks of one’s misdeed was definitely not easy,” the ACC added.
ACC said it is becoming clearer that the custom inspectors were involved in soliciting bribes from importers in a more discreet way. They communicated through various social media apps to communicate and shared bank account details, the findings revealed.
They resorted to use bank account of acquaintances and business people to blend their money with normal business-related financial activities, and these were done to disguise the origin of the money.
ACC said “They held their illicit fund in other people’s accounts and either moved to from one account to another or invested in commercial activities or interest-bearing deposits held in the name of their relatives.”
Everything was built into the cost of the goods and billed to the Bhutanese importers. Emphasizing one case, in one consignment, the supplier calculated Nu 30,000 as custom setting after smuggling 60 bags of plastic.
It was learnt that some Custom officials had an arrangement with some suppliers in India as well as some importers in Bhutan.
The betel nut connection
One importer dealing in supply of betel nuts and leaves sought to establish a link with custom officials as it was unpredictably and risky for him to bring undervalued or illegal consignments without established setting with customs, the ACC found.
Evidence shows that the importer arranged with a supplier across the border to undervalue their invoice by 50 percent for declaration at the customs check post. Half of the tax evaded, sometimes even more, went to the customs officials whereas the remaining half remained as a benefit to the importer, the commission found.
The demand for bribes mainly came from customs officials, whose day shift fell on physical inspection and the payments collected from the parties were shared among themselves. However, the one who signed on the declaration forms takes a bigger cut for taking the risk.
Falsifying declarations, passing contraband items like tobacco and narcotics; arranging and certifying fake import documents for sending RTGS (online INR payment via banks), facilitating release of stranded consignments without imposing demurrage charges, assisting movement of physical cash through the border and withholding of invoices from processing for declaration are other compelling reasons why bribery occurred, the ACC found.
Meanwhile, as per ACC’s findings, the preliminary investigation revealed that two private individuals teamed up to venture on doma supply business and they have imported vegetables and doma in the name of at least four licenses.
The findings also revealed that from 2020 till mid-September 2021, the combined value of doma products imported through these four licenses amounted to Nu 176.419 mn which was imported through Phuentsholing. However, they were importing more than just doma or vegetables.
They were also involved in smuggling of tobacco products hidden in vegetables and doma as well as engaging in other fraudulent financial scam. They are also suspected to be sending cash collected from selling of tobacco to Jaigaon through some carriers. In fact, one of them was arrested for smuggling of tobacco in June 2021 and is currently released on bail.
In addition, the duo established a link with certain customs officials and paid bribes ranging from Nu 11,000 to Nu 80,000 per instance. They paid bribes to evade 20 percent sales tax on half the value of betel nut consignment.
They also evaded tax by falsifying the proportion of consignment between betel nut and betel leaves because of wide differences in tax rate. The pattern of their travel also suggests that they usually preferred to clear their consignment at late evening when the MDP is about close its business hour.
The paper has learnt that the loaders demanded money from importers at more than the prescribed official rates. The demand went up if they came across contraband or prohibited items like tobacco, narcotics, plastic etc.
In one instance, a group of loaders discovered tobacco products hidden inside the consignment belonging to one businessman.
The loaders initially demanded Nu 100,000 but later they negotiated and brought it down to Nu 80,000. “However, the man sought help of one police personal and out of fear of being reported to the police, the loaders returned the money but, in retribution, lodged a complaint against the man for importing tobacco,” stated the ACC.
He got arrested in June 2021 and the case was charged sheeted to Phuentsholing Dungkhag Court.
Clearing agents next
In connection to this case, the commission has detained eight people of which four have been released. Of the other four suspects, three are customs inspectors and a businessman.
The ACC investigation has so far caught around five to six customs inspectors and another five loaders. One more person is a former customs inspector who played a role of a middleman. Also, involved are a fairly large number of Bhutanese business people mainly from Thimphu and Phuentsholing who paid the bribes to the customs.
In general, the bribe paying parties were mostly from across the border and often facilitated by middlemen and clearing agents and in most cases, the bribe payer and the receiver did not have direct interface.
The ACC is planning to now go after the clearing agents too as part of its investigation.
The bribe amount for customs inspector was from as low as 10,000 to 120,000. The ACC has not been able to establish any bribery of RBP, BAFRA and Dessups though there are some lapses on their part.
While the ACC has been able to track a number of bribes paid online to customs officers it has not been able to get the actual numbers of how much revenue was lost due to non payment or evasion of taxes. This is because the ACC can only get documents for those things listed by the customs as there are no documents for the smuggled items or the ones that avoided tax.
A customs officer detained by ACC confessed that the movement of goods through the MDP led to a major drop in bribes given the limited imports and the process.
This shows that bribery and tax evasion had been going on for years at Phuentsholing customs.
The Bhutanese paper carried an investigative story on MDP in July 2021 highlighting importers and traders complaining about extortion, theft and damages while getting their goods from Phuentsholing through the MDP.