They were in business and providing services, under official licence, since 2004, when some 400 ‘authorised money changers’ were transformed into formal exchange companies (ECs), aimed at reforming the money changing and money remittance regime into a proper corporate setup. In addition to 24 full-fledge ECs (with 162 branches/booths and 570 arrangements with third parties), there also exist in the country 30 B category ECs with 237 branches. For the money exchange/remittance, the ECs have a total network of 969 business locations across Pakistan.
The business and trade circles, in particular those involved in Afghan Transit Trade, and expatriates staying abroad illegally, rely heavily on ECs for transfer of funds. Some parents use ECs services for meeting study expenses of their wards abroad. During the last nine months (January-September, 2008), the inward remittances through the ECs, according to State Bank of Pakistan (SBP), amounted to $1.423 billion, while their outward remittances stood at $1.675 billion and their sales to banks figured over $1 billion.
In addition to a daily report of transactions of $5,000 and above, it is mandatory for the ECs to submit to the State Bank of Pakistan (SBP) weekly, monthly and annual reports on the business transacted by them. These steps enabled SBP to bring ECs’ transactions under proper documentation.
During the last two years, after inspecting their operations, SBP suspended licences of two B category ECs on violation of foreign exchange rules/regulations and issued explanation letters to 10 ECs besides issuing show-cause notices to many others. However, it seems that the lust for money and craze for amassing wealth often entice some people to indulge in unfair practices and use unfair means to become rich overnight.
In Pakistan, constant slide down of the country’s economy and depreciation in the value of its currency, during the last few months, made the people panicky. The nova rich, amongst Pakistanis, started stashing their money overseas, hoping to reap quick returns on their funds. The moneychangers met the needs of this class as well, often using means not permitted by the law. Furthermore, continuous trade deficit weakened the Pakistani currency, impacting the country’s economy adversely.
To address the worsening situation, the economic wizards of the state remained busy in introducing changes to the economic policies. But, nobody appeared serious about cutting down the import bill. Due to continuous trade deficit, the country’s foreign exchange reserves kept depleting, hitting the bottom this year. The situation shocked the citizens while the authorities started mulling plans to resuscitate the economy.
Meanwhile, a genius among the country’s top advisers remained engaged in research and field investigations. After eight months of laborious and tedious job, he finally announced the conclusions of his treatise, disclosing that moneychangers were engaged in ‘fiscal terrorism’. Not only were they ruining Pakistan’s economy and taking away foreign exchange, but they have also established a parallel banking system for foreign exchange transactions. He revealed that he wanted to take action against the ‘fiscal terrorists’ four months ago when he had detected huge amount of money transactions in Karachi, Lahore and Peshawar, but was stopped by the SBP governor. However, this time, his men nabbed two directors of a leading exchange company under the 1947 Foreign Exchange Act.
The theory propounded by the adviser has raised the citizens’ awareness level about the types of terrorism. Earlier, ordinary mortals were only aware about the terrorism of physical kind, which inflicted losses, both in men and material, but its impact remained localised. Now, they know about the ‘fiscal terrorism’, whose impact is more widespread and can sometimes even affect the whole nation. There could be many other types of terrorism, including food terrorism, trade terrorism, energy terrorism, black coat terrorism, media terrorism, power terrorism and so on and so forth.
The citizens have already experienced food and energy terrorism, which remained with them, for some time, this year. They saw a form of media terrorism when the state sleuths paraded two directors of an exchange company handcuffed. In developed countries, citizens are not paraded handcuffed and if the authorities want the visuals to be shown only backs of the alleged perpetrators of crime can be shown. As a legacy of the colonial rule, the state minions are free to indulge in any type of terrorism during the course of their duties and yet escape punitive action.  
Whatever, the type of terrorism may be, it is the prerogative of the top guns of the law enforcement agencies to decide under which act or clause to book the persons alleged to be the violators of law. At present, there are certain contradictory provisions relating to foreign exchange transactions. Foreign Exchange Regulation Act 1947 is the main legislation, which provides regulatory powers to SBP for making rules/regulations to govern the foreign exchange/remittance business. However, it does not empower SBP to impose financial penalties on persons or companies who violate the foreign exchange rules/regulations. At the same time, Protection of Economic Reforms Act (PERA), 1992 provides complete freedom to individuals to bring, hold, sell, transfer and take out foreign exchange within or outside Pakistan. 
As regards terrorism, it is dealt with under the Anti-Terrorism Act of 1977, which carries deterrent punishment, maximum being life imprisonment or death. However, the two persons arrested for alleged fiscal terrorism have been booked under Foreign Exchange Act of 1947, which carries a maximum punishment of two years. All crimes carrying a maximum punishment of up to three years imprisonment are bailable offences in Pakistan.
However, it appears that some ECs did not remit the foreign exchange entrusted to them by the expatriates for delivery to their near and dear ones in Pakistan, but preferred to retain it abroad for sale to unscrupulous elements, including those involved in Afghan Transit Trade and smuggling of other items to Pakistan. Instead of remitting foreign exchange, these ECs allegedly paid the equivalent amount to the transferees in Pakistani currency, using local accounts. Being an illegal practice, obviously, the ECs indulging in it would not inform the State Bank of Pakistan about such under-the-cover transactions.
Meanwhile, the theory of ‘fiscal terrorism’ has become talk of the academia, the world over. Now think-tanks and institutes of higher learning are planning to invite the genius adviser for his thought-provoking and enlightening talks. Some leading publishers are also thinking to approach him for the publishing rights of his treatise. The growing popularity of the adviser has upset his adversaries, who have started floating canards about the authorship of his treatise.