February 2021 has significant importance for Pakistan due to a review of its progress complying with the remaining six action items under anti-money laundering and combatting financing of terrorism [AML-CFT] mandates agreed to by us in a Financial Action Task Force (FATF) plenary meeting held in June 2018.
We are already falling behind the stipulated timeline to meet FATF’s remaining conditions. Normally, any jurisdiction that enters the International Co-operation Review Group (ICRG) gets a one-year observation period to work with the FATF regional organ to address the deficiencies before public identification and formal review by the FATF. In our case, we were informed by the FATF regarding our strategic deficiencies and their consequences in 2016, which were duly, communicated to all relevant law enforcement agencies (LEAs). However, based on internal rifts and lukewarm attitude towards the warnings of FATF, we created a problematic situation for ourselves that is negatively impacting our businesses, economic and social spheres—more than anything, losing our respect in the international community. As usual, our so-called analysts, appearing in the media as “strategists” and even responsible officeholders started blaming “hostile forces” using AML/CFT as a tool to malign Pakistan. Many declared it a “conspiracy” against Islamic countries having nuclear capability.
Despite being cognizant of the severe consequences of non-compliance, our approach in dealing with critical issues/threats of money laundering and combating financing of terrorism ML/CFT has largely remained unchanged. It is obvious if we look at the shortcomings in the recent regulations regarding Designated Non-Financial Businesses and Professions (DNFBPs), especially related to the real estate sector. It is one of the grey areas, highlighted by the Asia Pacific Group (APG), in their Mutual Evaluation Report published about Pakistan in October 2019. This sector was subsequently termed as non-compliant in a Follow-up Report (FUR) published by the APG in September 2020.
Pakistan tried to address these concerns through introducing changes in the Anti- Money Laundering Act, 2010 vide Anti-Money Laundering (Second Amendment) Act, 2020. This amendment defines DNFBPs and delegates powers to Federal Board of Revenue (FBR), under section 6 read with schedule IV of the said ACT, to regulate several segments of DNFBPs, namely real estate agents, jewelers, dealers in precious metals and precious stones, and accountants who are not the members of the Institute of Chartered Accountants of Pakistan (ICAP) and the Institute of Cost and Management Accountants of Pakistan (ICMAP).
In view of the powers conferred under the amended Anti-Money Laundering Act, 2010, FBR issued generic regulation through SRO 924(1)2020 on September 29, 2020 to regulate important sectors. The anomalies in the regulation regarding monitoring of jewelers, dealers in precious metals and stones were highlighted in FATF & Pakistan’s faulty plan, Surkhyian, January 21, 2021. In the said article, it was also highlighted that these generic regulations would not serve the purpose for which detailed guidelines are available by FACTA. It was emphasized that in order to address FATF’s concerns, issuance of industry specific regulations is the only way forward. Otherwise, the illicit flow of funds will continue to infect our financial system.
The complete roadmap to come out of the existing quagmire of FATF and achieve capability to take effective measures against ML/CFT, is available in the book, coauthored by us, Pakistan Tackling FATF: Challenges and Solutions. The book highlights critical shortcoming in our laws and their enforcement to counter terrorist financing, money laundering, tax evasion and all other financial crimes. It precisely pinpoints the weaknesses in the existing anti-terrorism, anti-money laundering, tax and other laws, contradictory provisions and policies coupled with faulty strategy and lack of a comprehensive plan to uproot these menaces. Even after providing a pragmatic model for not only coming out of the grey list of FATF but for our own survival, countering all the threats against our national security, the Government paid no heed to it till today.
It is worthwhile to mention that while in the grey list, our governments from 2008 to 2020 offered asset whitening-schemes and amnesties. Even 2021 started with extension of amnesty for the developers, builders and buyers in the garb of ‘Prime Minister’s Package for Construction Industry’, which is widely publicized at the website of FBR, while the same agency is mandated to regulate several segments of DNFBPs including real estate agents, jewelers, dealers in precious metals and precious stones, and accountants who are not the members of the Institute of Chartered Accountants of Pakistan (ICAP) and the Institute of Cost and Management Accountants of Pakistan (ICMAP).
It may be recalled that while addressing a Press conference on October 4, 2018, Special Assistant to Prime Minister on Accountability, claimed that details of more than 10,000 properties owned by Pakistanis were traced in Dubai and England and declared it “a huge success”. He said: “We have formed a task force which will ensure the money sent abroad is brought back“. He said that assets detected could be divided into two categories; belonging to public officeholders and common citizens. After 30 months, not a single penny has been recovered from the culprits, he mentioned.
On the last day of 2020, the Prime Minister of Pakistan gave a “New Year gift” to the nation [read rich developers, builders, contractors and buyers of expensive property]. In a brief televised address, the Prime Minister, instead of offering relief package for 2021 to the needy and the poor suffering immensely after second deadly wave of Covid-19 endemic, extended amnesty to the rich and mighty, who even after numerous amnesties, offered by successive governments in the past, are yet not in a position to explain the sources of their investment in real estate business!
According to FBR’s Press release issued on December 31, 2020: “The last date for seeking immunity by builders and developers from probing their source of funds and availing fixed tax regime has been extended from 31st December 2020 to 30th June 2021. Similarly, the last date for builders and developers who want to avail fixed tax regime has been extended from 31st December 2020 to 31st December 2021. The last date for completion of projects has been extended from 30th September 2022 to 30th September 2023 and last date for buyers of housing units and plots has been extended from 30th September 2022 to 30th March 2023”.
It is simply shocking that FBR on the one hand is acting as watchdog for real estate agents and on the other has issued clarification even 20 days before the Presidential Ordinance [The Income Tax (Amendment) Ordinance, 2021] extending benefit to persons/entities engaged in real estate business. This public announcement was a mockery of efforts (sic) our government claims to have been making to come out of grey list of FATF.
From the perspective of ML/CFT, the real estate sector is very important, as cash of billions of rupees exchange hands from the stage of buying land, developing, constructing and finally selling to buyers. There are two rates—one notified by District Collector Officers (DCOs) and second notified by FBR. The actual transaction in majority of the cases is on much higher price in posh localities of big cities, where buying property is considered a symbol of wealth and prestige. The registration is made at much lower rate than actual price while balance is settled by means other than documented which is a common practice and this is evident from admission by the State by inserting the following provisions of law [Section 100D—Special provisions relating to builders and developers] in the Income Tax Ordinance, 2001 by Finance Act, 2020 and after amendment through The Income Tax (Amendment) Ordinance, 2021 reads as under:
“(3) The provisions of section 111 shall not apply to capital investment made in a new project under clause (a) of sub-section (1) in the form of money or land, subject to the following conditions, namely: –
- if the investment is made by a builder or developer being an individual–
- in the form of money, such builder or developer shall open a new bank account and deposit such amount in it on or before the 30th day of June 2021; or
- in the form of land, such builder or developer shall have the ownership title of the land at the time of commencement of the Tax Laws (Amendment) Ordinance, 2020 (I of 2020);
- if the investment is made by a person in a project through a company or an association of persons, –
- such company or association of person shall be a single object (builder or developer) company or association of persons registered under the Companies Act, 2017 (XIX of 2017), the Limited Liability Partnership Act, 2017 (XV of 2017) or the Partnership Act, 1932 (IX of 1932), as the case may be, after the date of commencement of the Tax Laws (Amendment) Ordinance, 2020 (I of 2020) and on or before the 30th day of June, 2021; and
- the person shall be a member or shareholder of such association of persons or company, as the case may be;
and if the capital investment is made, –
- in the form of money, such amount shall be invested through a crossed banking instrument deposited in the bank account of such association of persons or company, as the case may be, on or before the 30th day of June 2021; or
- in the form of land, such land shall be transferred to such association of persons or company, as the case may be, on or before the 30th day of June 2021:
Provided that the person shall have the ownership title of the land at the time of commencement of the Tax Laws (Amendment) Ordinance, 2020 (I of 2020);
- a person making an investment under clause (a) or (b) shall submit a prescribed form on Iris web portal by 30th day of June 2021;
- the money or land invested under clause (a) or (b) shall be wholly utilized in a project; and
(e) completion of the project shall be certified in the following manner, namely: –
- in case of a builder, the map approving authority or NESPAK shall certify that grey structure as per the approved map has been completed by the builder on or before the31st day of March 2023; and
(ii) in case of a developer, –
(A) the map approving authority or NESPAK shall certify that landscaping has been completed on or before the 31st day of March 2023;
(B) a firm of chartered accountants having an ICAP QCR rating of ‘satisfactory’, notified by the Board for this purpose, shall certify that at least 50% of the plots have been booked for sale and at least 40% of the sale proceeds have been received by the 31st day of March, 2023; and
(C) at least 50% of the roads have been laid up to sub-grade level as certified by the approving authority or NESPAK.
(4) The provisions of section 111 shall also not apply to. –
(a) the first purchaser of a building or a unit of the building purchased from the builder in respect of purchase price of the building or unit of the building subject to the following conditions, namely: –
(i) full payment is made through a crossed banking instrument to the builder during a period starting from the date of registration of the project with the Board under this section and ending on the 30th day of June, 2021, in case the purchase is from a new project; and
(ii) full or balance amount of payment is made through a crossed banking instrument to the builder during a period starting from the date of registration of the project with the Board under this section and ending on the 30th day of June, 2021, in case the purchase is from an existing incomplete project; and
(b) the purchaser of a plot who intends to construct a building thereon, if–
(i) the purchase is made on or before the 30th day of June 2021;
(ii) the full payment is made on or before the 30th day of June 2021 through a crossed banking instrument;
(iii) construction on such plot is commenced on or before the31st day of December 2021;
(iv) such construction is completed on or before the 30th day of September 2022; and
(v) the person registers himself with the Board on the online Iris web portal.
(5) Where subsection (3) or (4) apply, the value or price of land or building, as the case may be, shall be the higher of clause (a) or (b) below: –
- 130% of the fair market value as determined by the Board under sub-section (4) of section 68; or
- at the option of the person making investment, the lower of the values as determined by at least two independent valuers from the list of valuers approved by the State Bank of Pakistan”.
It is pertinent to mention that section 111 deals with unexplained assets and income providing that if a person fails to explain the source of any creation of asset, investment, and expenditure or any credit/amount in his accounts, then the same will be added in his income under the head ‘Income from Other Sources’. Thus, the developer and owner can overstate their assets to whiten a greater amount. Sub-section (6) of section 100D says that the following cannot take benefit of this amnesty from probe into the source:
- “holder of any public office as defined in the Voluntary Declaration of Domestic Assets Act, 2018 or his benamidar as defined in the Benami Transactions (Prohibition) Act, 2017 (V of 2017) or his spouse or dependents;
- a public listed company, a real estate investment trust or a company whose income is exempt under any provision of this Ordinance; or
- any proceeds derived from the commission of a criminal offence including the crimes of money laundering, extortion or terror financing but excluding the offences under this Ordinance”
The issue is that if names of the owners of the projects are not made public how will the public at large come to know that the people/entities with which they are dealing and who cannot explain their source are not benamidar (name lenders) or nominees of those who made money from criminal activities or looting and plundering of public funds?
The amnesty scheme for developers, builders and buyers vis-à-vis their taking huge tax benefits cannot be held confidential as held by the Supreme Court of Pakistan in Watan Party & Others v Federation of Pakistan & Other PLD 2012 Supreme Court 292, which says:
“Article 19A has thus enabled every citizen to become independent of power canters which, heretofore, have been in the control of information on matters of public importance…. Article 19A is a grant of the Constitution and, therefore, cannot be altered or abridged by a law enacted by Parliament…It, therefore, will not for this Court to deny to the citizens their guaranteed fundamental right under Article 19A by limiting or trivializing the scope of such right through an elitist construction whereby information remains the preserve of those who exercise state power.”
Section 100D(6)(a) has adopted the definition of “holder of any public office” as defined in “the Voluntary Declaration of Domestic Assets Act, 2018 or his benamidar as defined in the Benami Transactions (Prohibition) Act, 2017 (V of 2017) or his spouse or dependents”. In Voluntary Declaration of Domestic Assets Act, 2018 passed under the rule of Pakistan Muslim League Nawaz (Nawaz)—PMLN and adopted by the coalition Government of Pakistan Tehreek-i-Insaf (PTI), made illegal/untaxed assets in the hands of public office holders’ kosher after 10 years! The same position is adopted in section 100D(6)(a). As regards section 100D(6)(c), how it will be established that money invested by beneficiaries of the scheme are not proceeds derived from the commission of a criminal offence including the crimes of money laundering, extortion or terror financing when section 216 is abused and the names of the beneficiaries are not disclosed. To the extent of concealment under the Income Tax Ordinance, exclusion is provided despite the fact that the same is predicated crime under the AML 2010. It is an open defiance of guidelines issued by the FATF and even then, the politicians in power and bureaucracy claim that all the remaining six requirements of the FATF are complied with!
Will any government in the world accept the logic that the crime proceeds, and tax evasion become “clean” sources in the hands of public officeholders and employees of State after ten years?
It is worth-mentioning that the National Accountability Ordinance, 1999 applicable from January 1, 1985 was ignored by PMLN under Foreign Assets (Declaration and Repatriation) Act, 2018 and Voluntary Declaration of Domestic Assets Act, 2018 and then by the PTI Government first through Assets Declaration Ordinance, 2019 and then by Assets Declaration Act, 2019. However, nobody took note of it. Now section 100D meant for developers, builders and buyers have adopted the same and none has noticed it, though both the parties in power and all opposition parties under the umbrella of Pakistan Democratic Movement (PDM) are proving each other “corrupt”. If the National Accountability Ordinance, 1999 was draconian and reflective of the legacy of a dictator, meant for political revenge, why did not Pakistan Peoples Party and PMLN repeal it during the Decade of Democracy [2008-18]?
If the PTI Government claimed to be a champion against corruption, what prevented it since coming into power, from introducing a Bill in the Parliament bringing into its ambit generals and judges—in fact all powerful segments—liable to be probed by an autonomous agency answerable directly to people of Pakistan through their elected members—a joint Standing Committee of Senate & National Assembly.
“The policy of appeasement towards corrupt practice, looting and plundering of national wealth, spread over the last many decades, has culminated in the syndrome of defeatism that “nothing can be done”, hence amnesties! In other words, defeatism has become a national malady—where the beneficiaries of tainted money successfully shift the entire blame on weak administration and existing laws. The Federal Board of Revenue (FBR) lost a huge tax base and collection due to frequent amnesties”—Amnesties & tax losses, Surkhyian, November 13, 2020 and Legislators, declarations & accountability, Surkhyian, January 20, 2020.
The question that arises is that when there are glaring inactions why corrective and remedial measures have not been taken? The watchdogs, investigators and prosecution agencies should take action after claiming in their possession incontrovertible evidence but in many cases, the Supreme Court has repeatedly admonished them either for selective accountability or lack of capacity to make a case beyond reasonable doubt. The remedy is that all the agencies, through an independent prosecution body, must seek permission of the relevant court for arresting and/or attaching assets. Presently, there are no checks and balances to curb their highhandedness or other malpractices. This will be the fulfilment of fundamental right—Article 10A of the Constitution. The same should be the case with all others facing cases of money laundering or financing of terrorism corruption. The system should be fair and just, work without any internal or external influence. It should not be motivated by favour or become ineffective due to fear of persecution on change of governments. In case we fail to do so, the community of nations will never take us seriously in fighting against financial crimes by merely making amendments in laws—even if we come out of the grey list of FATF.
Notwithstanding FATF or any other watchdog, the nation wants looted wealth back, not just putting looters behind bars and later allowed to be released on bail or even go abroad for medical treatment. Nothing has been done on the front of retrieving untaxed and/or looted wealth for which Suo Motu Case No. 2 of 2018 was initiated about 27 months ago by the Supreme Court of Pakistan.
In cases of financial crimes, the real issue is retrieval of looted money and retrieval of tax on untaxed assets. This has not been done even in a single case despite the Supreme Court’s ruling for action against the Attorney General in 2010 for withdrawal of Pakistan’s claim of US$ 60 million in para 177 to 179 of the case reported as Dr. Mobashir Hassan and other v FOP and others PLD 2010 SC 265. Tragically, even after 10 years, the order of the Supreme Court remains unimplemented. This discredits our institution in the eyes of the world.
The real estate sector in Pakistan is a significant source of concealing untaxed money and people can easily convert proceeds of crime into “investment”—courtesy the laws and policies of the governments and laws passed by Parliament. Indeed Pakistan aptly fits in the concept of a “soft state”—famously articulated by the Nobel Laureate, Swedish sociologist Gunnar Myrdal in his 1968 three-volume work, Asian Drama: An Inquiry into the Poverty of Nations. It is a broad based assessment of the degree to which the state, and its machinery, is equipped to deal with its responsibilities of governance. The more soft a state is, the greater the likelihood that there is an unholy nexus between the law maker, the law keeper, and the law breaker.
Real estate is considered among the most vulnerable sectors for money laundering and Pakistan is no exception with extraordinary investments in palatial bungalows, farm houses, country homes, summer and winter retreats, vacant plots of land etc. This sector provides an umbrella to criminals in concealing and transmitting their illicit funds. They use different techniques to launder proceeds of their crimes.
A review of current regulations Federal Board of Revenue Anti Money Laundering and Countering Financing of Terrorism Regulations for DNFBPs, 2020 [hereinafter “FBR AML/CFT Regulations] shows that Real Estate Agents are defined in Rule 2(n) as under:
“Real Estate Agent” includes builders, real estate developers and property brokers and dealers when they execute a purchase and sale of a real property, participate in a real estate transaction capacity and are exercising professional transactional activity for undertaking real property transfer”.
The above definition and position under section 100D of the Income Tax Ordinance, 2001 are self-contradictory. FBR on the one hand is to regulate under ML/CTF and on the other, facilitate those who cannot explain their source of investment. It is a paradoxical situation creating serious conflicts of laws and interests.
Secondly, ‘real estate’ is a much broader term and refers to transactions and their treatments that widely differ globally due to variance in culture, nature, value and magnitude of international markets for agriculture, residential, commercial and industrial real estate. Furthermore, the definition of real estate agents is not comprehensive and includes only builders, real estate developers, and property brokers, dealers; whereas these terms are not defined separately to determine the specific nature and scope of builders, developers or property brokers. Moreover, in most parts of Pakistan, buyers and sellers of properties often do not involve a third party to sell or buy real estate. They communicate with each other and close their transactions directly. In many cases these transactions are closed with cash since the parties to these types of transactions rarely have bank accounts. The present regulations do not address these types of transactions.
Regulation 3 of Federal Board of Revenue Anti Money Laundering and Countering Financing of Terrorism Regulations for DNFBPs, 2020 which is reproduced hereunder, requires that every DNFBP will be registered with it. The Real Estate sector being a part of the DNFBPs is not well defined. The Regulations provide a narrow definition of Real Estate Agents. It does not clarify under the real estate category who should be required to be registered and what specific thresholds for registration need to be addressed in the existing regulations?
- Registration and market entry control of DNFBPs. –
(1) Every DNFBP shall be registered with the Board.
(2) The DNFBP shall provide any information or documentation that may be required by the Board for the purposes of registration or keeping the DNFBP registration up to date, including but not limited to criminal records of the senior management and beneficial owners
(3) The DNFBP shall notify the Board if it ceases operations as a DNFBP within thirty business days after ceasing operations, in the form and manner that may be required by the Board, and the Board shall deregister the DNFBP if the appropriate information is provided
The role of property appraisers, marketing and leasing agents, management and other similar professions engaged in buying, selling, leasing, or land development, need to be addressed to properly identify the potential AML-CFT concerns regarding the real estate sector. Regulations 4 and 5 require that DNFBPs will identify, assess and understand their risks for customers, countries or geographic areas including product and services, transaction and delivery channels.
- New products, practices and technologies. –
(1) The DNFBP shall-
(a) identify and assess the ML and TF risk that may arise in the development of new products, businesses and practices, including new delivery mechanism, and the use of new and pre-existent technology; and
(b) prior to the launch or use of product, practice or technology, DNFBP shall undertake the risk assessment and take appropriate measures to manage and mitigate the risks.
Today, we are unable to understand how these sectors will address risks related to customers, products, and services in absence of any formal classification mechanism in place. Moreover, we need guidelines issued by FBR that comprehensively define real estate products, their criteria for addressing potential risks and a matrix for rating their risk.
Currently, no parameters or guidelines are available to assess risks for services or delivery channels, the corporate sector, third parties, individuals or family members. How should services and products in residential, commercial, vacant land, agricultural land, leased property or multi-unit properties be defined?
Currently, the definition in Regulation 2(n) only addresses concerns related to real estate agents and deals with purchase and sale of property, but other activities in multiple real estate sectors are completely ignored. This is a serious gap that cannot be bridged by simply issuing nonspecific, macro regulations.
2 (n). “Real Estate Agent” includes builders, real estate developers and property brokers and dealers when execute a purchase and sale of a real property, participate in a real estate transaction capacity and are exercising professional transactional activity for undertaking real property transfer;
In our current regulations no distinction is provided for low, medium or high-risk jurisdictions within the country for the sale and purchase of real estate. FBR needs to issue additional guidelines that identify high risk areas for Money Laundering and Terrorist Financing, drug trafficking, and other financial crimes throughout the country where criminals exploit real estate sector proceeds. Real estate businesses are exposed to other risks that money launderers and financiers of terrorism frequently exploit including the worth of real estate assets, operational format, number of offices and locations, offshore offices, size of overall staff, etc. These issues must be addressed through comprehensive guidelines.
Section 7G of the AML Act 2010 read with Regulation 7 requires maintenance and implementation of compliance program, there is no mention in the law or regulations identifying the entities/individuals that are responsible for maintaining the compliance program. It reads as under:
AML Act 2010: 7G Compliance Program: Every reporting entity shall implement compliance management arrangements, including the appointment of a compliance officer at a management level and training programs, having regard to the money laundering and terrorism financing risks and the size of the business during the course of their activities subject to this Act and as prescribed.
Regulation 7 of Federal Board of Revenue Anti Money Laundering and Countering Financing of Terrorism Regulations for DNFBPs, 2020.
- In order to implement compliance programs as set out in section 7G of the AML Act, the regulated person shall implement the following internal policies, procedures and control, namely: –
- compliance management arrangements, including the appointment of a compliance officer at the management level, as the individual responsible for the regulated person *compliance with these Regulations, the AML Act and other directions and guidelines issued under the aforementioned regulations and laws;
[Note: *Poor drafting wherein the word ‘compliance’ should have been ‘compliant’.]
- screening procedures when hiring employees to ensure the integrity and conduct, skills, and expertise of such employees to carry out their functions effectively;
- an ongoing employee training program; and
- an independent audit function to test the system.
- For purposes of sub-regulation (1)(d) testing the system includes an assessment of the adequacy and effectiveness of the policies, controls and procedures adopted by the regulated person to comply with the requirements of these regulations; and to make recommendations in relation to those policies, controls and procedures.
- For purposes of (a) the regulated person shall ensure that the compliance officer shall -:
- reports directly to the board of directors or chief executive officer or committee;
- has timely access to all customer records and other relevant information which they may require to discharge their functions, as well as any other persons appointed to assist the compliance officer;
- be responsible for the areas including, but not limited to-
- ensuring that the internal policies, procedures and controls for prevention of MUTT’ are approved by the board of directors of the regulated person and are effectively implemented;
- monitoring, reviewing and updating AML/CFT policies and procedures, of the regulated person;
- providing assistance in compliance to other departments and branches of the regulated person;
- timely submission of accurate data/ returns as required under the applicable laws;
- monitoring and timely reporting of Suspicious and Currency Transactions to FMU; and
- such other responsibilities as the regulated person may deem necessary in order to ensure compliance with these regulations.
- In the case of a corporate group, in addition to the obligations established in these regulations, the regulated person shall implement –
- policies and procedures for sharing information required for the purposes of CDD and risk management;
- the provision, at group-level compliance, audit, and/or AML & CFT functions, of customer, account, and transaction information from branches and subsidiaries when necessary for AML & CFT purposes; and
- adequate safeguards on the confidentiality and use of information exchanged, including safeguards to prevent tipping-off.
- The DNFBP shall ensure that their foreign branches and majority-owned subsidiaries apply AML & CFT measures consistent with Pakistan requirements where the minimum AML & CFT requirements are less strict than Pakistan, to the extent that host country laws. If the foreign country does not permit the proper implementation of AML/CFT measures consistent with that of Pakistan requirements, financial groups should apply appropriate additional measures to manage the risks and inform the Commission.
Regulations pertaining to Customer due diligence and beneficial ownership, enhanced due diligence, simplified due diligence are also generic and need to be redrafted in view of the potential risks exposed by each sector. Additionally, these regulations require measures against high-risk countries, but most countries known as offshore havens with strict secrecy laws are classified as either medium risks or low risks. How will you cope up with those offshore jurisdictions rated medium or low risks while performing due diligence? About reliance on third parties regarding performance of CDD, however, this must be done according to specific guidelines to protect data privacy and data breaches. FBR should make sure that that the data access and the reports generated must be traceable/auditable with activity logs to avoid any ambiguity, and any exclusion must be specifically covered in the policy document.
Regulation 14, requires that DNFBP’s shall file Suspicious Transaction Reports (STRs) and Currency Transaction Reports (CTRs) to Financial Monitoring Unit (FMU), reads as under:
- “Reporting of STR and CTR” (1) The DNFBP shall file STR and CTR to FMU, as per requirements prescribed by FMU as required under section 7 of AML Act.
However, the definition of a real estate agent is limited to builders, real estate developers, property brokers and dealers while other persons attached with this industry are totally ignored.
These rules should be industry specific, covering all elements linked with any real estate business to properly expose suspicious transactions. RBA GUIDANCE FOR REAL ESTATE AGENTS of June 17, 2007 by FATF have not been fully comprehended by our agencies as evident from ‘Guidelines for Real Estate Agents AML & CFT Guidelines, 2018’ issued by FMU of Pakistan and just gave the link to the Guidance on the Risk-Based Approach to combat Money Laundering and Terrorist Financing that was developed by the FATF in close consultation with representatives of the real estate. No such effort is made to engage the local representative of real estate. Their data is not centralized anywhere. They neither need any license or registration. The vast majority even does not file income tax returns and statements with provincial revenue bodies.
This guidance is presented in a way that is focused and relevant for real estate agents when they act for buyers or sellers. The roles and therefore risks of the different DNFBP sectors are usually separate. However, in some business areas, there are inter-relationships between different DNFBP sectors, and between the DNFBPs and financial institutions. For example, real estate transactions often involve financial institution lenders, as well as lawyers or notaries, and real estate agents.
Real estate is a lucrative sector for money laundering and terrorist financing. We need to devise comprehensive policies and procedures to address concerns in line with international standards, which on the one hand require educating real estate professionals and on the other hand will help the law enforcement agencies in identifying, investigating and mitigating potential risks. The role of non-financial professionals, corporate vehicles in facilitating real estate transactions, financial instruments, over and under valuations of property, the role of appraisers, investments, and mortgages for covering up illicit proceeds in our financial system must also be taken into consideration. The sooner we address and cover these lapses the better, otherwise our struggle to comply with FATF mandates will continue for an indefinite period, which can severely damage our economy as well as our image worldwide.
Ms. Huzaima Bukhari, Advocate High Court and Visiting Faculty at Lahore University of Management Sciences (LUMS), is author of numerous books and articles on Pakistani tax laws. She is editor of Taxation and partner of Huzaima & Ikram, a leading law firm of Pakistan. From 1984 to 2003, she was associated with Civil Services of Pakistan. Since 1989, she has been teaching tax laws at various institutions including government-run training institutes in Lahore. She specializes in the areas of international tax laws, corporate and commercial laws. She is review editor for many publications of Amsterdam-based International Bureau of Fiscal Documentation (IBFD) and contributes regularly to their journals. She has to her credit over 1500 articles on issues of public importance, printed in various journals, magazines and newspapers at home and abroad.
She has coauthored with Dr. Ikramul Haq many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes, Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
The recent publication, coauthored with Abdul Rauf Shakoori and Dr. Ikramul Haq, is Pakistan Tackling FATF: Challenges & Solutions
available at: https://www.amazon.com/dp/B08RXH8W46
She regularly writes columns for Pakistani newspapers and has contributed over 1500 articles on issues of public finance, taxation, economy and on various social issues in various journals, magazines and newspapers at home and abroad.
Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate and tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation and Visiting Faculty at Lahore University of Management Sciences (LUMS).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes, Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
The recent publication, coauthored with Abdul Rauf Shakoori and Huzaima Bukhari is Pakistan Tackling FATF: Challenges & Solutions
available at: https://www.amazon.com/dp/B08RXH8W46
He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities),, government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC). Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E – Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer. His notable publications are; Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan, Rauf’s Research on Labour Laws and Income Tax Etc. His articles includes; Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards., Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan,, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates. The recent book, coauthored with Huzaima Bukhari & Dr. Ikramul Haq is Pakistan Tackling FATF: Challenges & Solutions
available at: https://www.amazon.com/dp/B08RXH8W46