Tag: CFT

ISLAMABAD: Every cash transaction for sale and purchase of a housing unit of above Rs2 million is required to be reported under anti-money laundering (AML) / Counter Financing of Terrorism (CFT) to comply with conditions of Financial Action Task Force (FATF), the Federal Board of Revenue (FBR) said on Monday.

The FBR issued guidelines to provide guidance to real estate agents (REAs) in implementing and complying with requirement in AML/CFT regime.

The FBR said that currency transaction report (CTR) is required to be submitted when a developer receives cash or bearer negotiable instruments Rs2 million and above for selling real estate e.g. developer sells directly to buyer and receives direct cash payments.

Similarly, a developer pays with cash or bearer negotiable instruments Rs2 million and above for buying real estate e.g. property developer or builder pays for purchase of real estate for development.

Likewise, a broker receives or pays in case Rs2 million and above to be used subsequently in the purchase of real estate e.g. broker is a buyer’s agent who receives cash to be used subsequently to pay deposit/ or a settlement (either receipt or subsequent use may meet the CTR threshold).

However, real estate agent would not be required to file any CTR if all financial transactions are via wire transfers. If REA pays cash to sales staff as remuneration over the threshold, or to a supplier, or purchase of an asset such as a motor vehicle, it would not be subject to CTR filing. They would not be considered as buying and selling real estate.

The FBR said that the reason REAs are subject to the FATF standards and AML/CFT measures is because the real estate sector provides attractive assets for persons to launder funds from criminal activities given the large sums involved. “There are many example of criminals or corrupt officials using funds acquired from illegal activities to purchase real estate. REAs and their salespersons help customers to transact real properties and this could involve or facilitate the movement of large amounts of funds, sometimes across international boundaries. Real estate may also be involved with the financing of terrorism as terrorist groups may buy or sell real estate.”

Pakistan’s AML/CFT regulatory regime is strongly informed by the international AML/CFT standards promulgated by the FATF. The FATF is an international task force established in 1989 to develop international standards to combat ML, TF and the financing of proliferation (PF). The FATF published a revised set of 40 Recommendations on AML/CFT measures in 2012, which are being continuously updated.

Pakistan is currently under the FATF International Cooperation Review Process (ICRG) “Jurisdictions under Increased Monitoring” or “Grey list” process. Pakistan has committed to working with the FATF to address strategic deficiencies to counter ML and TF. Pakistan has also committed to improving its broader compliance with the FATF standards as part of its membership with the APG.

There is a definition of a REA under both the AMLA and AML/CFT regulations, as extracted below:

– AMLA, Section 2.Definitions (xii) (a)

(a) real estate agents, including builders and real estate developers, when performing the prescribed activities in the prescribed circumstances and manner;

-FBR AML/CFT Regulations for DNFBPs in Section 2.Definitions (n):

(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;

While the FBR AML/CFT Regulations for DNFBPs identifies four categories of REAs, in reality, your business could include all four with different business lines, or your real estate agency business is just brokerage.

ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday issued a notification to regulate the profession/business of accountants, jewelers, real estate agents in ongoing efforts against money laundering and countering finance of terrorism.

The regulations have been issued through SRO 924(I)/2020 dated September 30, 2020 to comply with the conditions under Finance Action Task Force (FATF), which is scheduled to meet October 2020 to evaluate Pakistan’s performance.

The regulations are called the Federal Board of Revenue Anti Money Laundering (AML) and Countering Financing of Terrorism (CFT) Regulations for DNFBPs, 2020.

The Designated Non-Financial Businesses and Professions (DNFBPs) are real estate agents, jewelers and accountants.

The regulations have been issued by FBR’s FATF Cell.

Under the new regulations, every DNFBP shall be registered with the FBR. 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.

The DNFBP shall notify the FBR 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 FBR, and the FBR shall deregister the DNFBP if the appropriate information is provided.

The DNFBPs shall maintain records as set out in section 7C of the AML Act which are sufficient to permit reconstruction of individual transactions including the nature and date of the transaction, the type and amount of currency involved and the customer involved in the transaction so as to provide, when necessary, evidence for prosecution of criminal activity.

The record may be maintained in paper or electronic form or on microfilm. The records of identifications data obtained through Customers Due Diligence (CDD), including Enhanced Due Diligence (EDD) process, including copies of identification documents, application forms, verification documents and other documents along with business correspondence, and results of any analysis undertaken shall be maintained for a minimum period of five years after the business relationship is terminated.

The DNFBPs shall retain such records till disposal of case where transactions, customers or instruments are involved in litigation or the same are required by a court of law or other competent authority, the DNFBP shall retain such records until such time as the litigation is resolved or until the court of law or competent authority indicates that the records no longer need to be retained.

The DNFBP shall satisfy promptly any enquiry or order from Board, designated law enforcement Agencies and FMU, for supply of CDD information and transaction records as per the relevant provisions of AML Act.

The DNFBPs shall conduct CDD in the circumstances and matters set out in section 7A(1) of the AML Act when they engage in the following activities, namely:-

Real Estate Agents- when they are involved in transactions for a client concerning the buying and selling of real estate;

Jewelers and Dealers in precious metals and stones – when they engage in any cash transaction with a customer or client equal to or above Rs. 2 Million; and

Accountants when they prepare for, or carry out, transactions for their clients concerning the activities described in section 2(xii)(c) and (d) of the AML Act.

The DNFBP shall identify the customer whether entering into a business relationship or conducting an occasional transaction, and whether natural or legal person or legal arrangement and verify that customers identity using reliable, independent sources documents, data or information as required under these regulations.

The DNFBP shall identify the beneficial owner and take reasonable measure to verify the identity of the beneficial owner by using reliable and independent document, data or sources of information as set out in these Regulations, such that the DNFBP is satisfied that it knows who the beneficial owner is.

Where the customer is represented by an authorized agent or representative, the DNFBP shall –

Identify every person who acts on behalf of the customer,

Verify the identity of that person by using reliable and independent documents, data or information as set out in these regulations;

and Verify the authority of that person to act on behalf of the customer.

For the purposes of verification of identity of customer or beneficial owner in these regulations, reliable and independent document, data or sources of information includes –

(a) for a natural person, copy of –

Computerized National Identity Card (CNIC) issued by NADRA; OR

National identity card for overseas Pakistanis (NICOP) and/or duly issued machine readable passport for non resident/overseas Pakistanis or those who have dual nationalities; or

Copy of Pakistan origin card (POC) issued by NADRA; and/or passport for Pakistanis who have given up Pakistan nationality; or Form B or smart/juvenile card issued by NADRA to children under age of 18 years; or

Where the natural person is a foreign national, either Alien Registration Card (ARC) issued by National Aliens Registration Authority (NARA), Ministry of Interior or Passport having valid visa on it or any other proof of legal stay along with the passport.

The DNFBPs shall apply EDD in the following circumstances, including but not limited to:

business relationship and transactions with natural and legal persons when the risks are higher;

business relationship and transactions with natural and legal persons from countries for which this is called for by the FATE and

PEPs and their close associates and family members.

EDD measures may include but shall not be limited to the following measures:

Obtaining additional information on the customer (e.g. volume of assets, information available through public databases, internet, etc.), and updating more regularly the identification data of customer and beneficial owner;

Obtaining additional information on the intended nature of the business relationship;

Obtaining information on the source of funds or source of wealth of the customer;

Obtaining information on the reasons for intended or performed transactions. Obtaining the approval of senior management to commence or continue the business relationship;

Conducting enhanced monitoring of the business relationship, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.

The record to be maintained and furnished by the Accountants, Real Estate Agents and Jewelers under these rules and as required by AML Act shall be subject to inspection by FBR, as laid down in section 6A(2)(f) of AML Act, who may be assisted by other law enforcement agencies.

Any violation of any provision of these regulations shall be subject to sanctions issued under the AML Act.