KTBA submits observations on suspicious transaction reporting by jewelers, real estate agents

KTBA submits observations on suspicious transaction reporting by jewelers, real estate agents

KARACHI: Karachi Tax Bar Association (KTBA) on Friday submitted its observations on reporting of suspicious transactions by jewelers and real estate agents to Federal Board of Revenue (FBR).

The KTBA in a letter to FBR said that the steps intended to proposed in the notification for Jewellers and Real Estate Agents are far from commercial realities and the legal peripheries of the business.

Besides making them responsible for disclosing the name and particulars of their customers which is perhaps the sole undisputed fundamental objective behind the record keeping, the mandate imposed upon them to keep track of their customers and keeping a constant intelligence and surveillance over the transaction to ensure that their payments have been made through kosher money, is completely unheard and unparalleled in the tax history of the country, the KTBA stated.

Never ever it has ever been witnessed that a shop keeper has been asked to make arrangement for conducting verification through reliable independent sources to ensure the transaction is risk free and is made out of taxable sources of the buyer which he duly declared in his return and wealth statement.

The KTBA stated this is no less than preposterous.

Right from the definition of Beneficial Owner along with ‘Explanation”, which has been carved out completely out of context, is alien to the whole back ground or the foreground of the subject, the KTBA said.

It needs to be deleted altogether and reintroduced with reference to the context, the KTBA recommended.

Another definition given is, for defining the person of “Real Estate Agent” who now consist of not only the Real Agents but the Registrars (for societies, authorities) and the Board of Revenues as well.

This implies that the same set of transaction will now not only be subject of record keeping at three different places but will be subject to verification by these three different and distinct authorities as well.

It is also included that Jewellers and Real Estate Agents, who are the Designated Persons, have to undertake the following;

i. The DP is made responsible to identify transaction where he believes that the transaction is being executed as benami transaction i.e. the beneficial owner of the transaction is different than the actual person making the transaction;

ii. The DP is required to conduct an independent verification of the customer making the transaction.

Moreover, as per the proposed Rule 33F, below mentioned transactions are to be considered as ‘suspicious transactions’ by the DP:
i. Transaction which involves fund derived otherwise than from business activity;

ii. Transactions which involve financing made through terrorism activity;

iii. Transaction where bank accounts are changed frequently;

iv. Transaction where the customer uses a bank account other than the bank account maintained in the name of the beneficial owner.

As a matter of fact, the responsibilities being assigned are investigative in nature, which a businessman ought not to have been delegated in the first place as it would tantamount to stepping into officer shoes.

The KTBA said that while imposing the reporting responsibility of a suspicious transaction to the Board and linking it with verification of the background of the individual conducting the transaction as well as to authenticate his mode of financing are the set of responsibilities that is very sensitive in its very nature and is far from the On ground realities of these businesses.

The FBR has been urged to redraft the whole of the notification with the due consideration to the details narrated above so that core objective of documentation of the transactions is not deterred.