ISLAMABAD: The bid to comply with the FATF requirements for binding real estate agents, property dealers, jewelers, brokers, housing authorities and developers for generating Suspicious Transaction Reports (STRs) has spread panic among millions of owners of these businesses across the country.
Now the Federal Board of Revenue (FBR) has sent out notices to over 22,000 registered property dealers across Pakistan, directing them to get registered on the website of the Designated Non-Financial Businesses and Professions (DNFBPs) in order to kick-start complying with the Financial Action Task Force (FATF) requirements.
The real estate businessmen expressed wonder over, what they called, the dual signaling of the government, as on the one side the government extended tax amnesty scheme for real estate builders telling them no source of income will be asked till registration deadline of June 30, 2021, while on the other hand the FBR is complying with tough FATF conditions simultaneously. These dual signaling is creating confusing situation for the potential investors, they added.
The Financial Monitoring Unit (FMU) has prepared red flag indicators for ascertaining Money Laundering or Terror Financing to comply with Financial Action Task Force (FATF) requirements. A combination of red flag indicators in addition to analysis of overall financial activities, and client profile may indicate potential money laundering (ML) and Terror Financing (TF) activity.
The red flag indicators placed by the FMU showed that the purchaser/seller’s economic profile does not align with the cost of property, source of funds cannot be identified or unclear, the client or transaction is from country or jurisdiction in relation to which the FATF has called for countermeasures or enhanced client due diligence measures or jurisdiction known to have inadequate measures to prevent money laundering and financing of terrorism, the client or any of its associated person/entity found positive match while screening against UN Security Council Resolutions (UNSCRs), purchaser/seller is linked to negative news or named in a news report on a crime committed or under law enforcement investigation/inquiry, clients who appear to be acting on somebody else’s instructions without disclosing the identity of such persons, unexplained delegation of authority by the client by using power of authority, purchaser/ seller appears to be acting as proxis for the purchase of properties and makes attempts to conceal the identity of beneficial owner, political exposed client who is linked to negative news/crime or any client who is member or close associate of such politically exposed person, purchaser/ seller provides an address that is unknown, believed to be false, or simply a correspondence address, purchaser/seller respectively buys and sells multiple properties in short time period and many such other indicators.
Now the Real Estate Consultants Association (RECA), DHA, has written letters to Minister for Finance Dr Abdul Hafeez Shaikh, Special Assistant to PM on Revenues Dr Waqar Masood, chairman FBR and others stating that the Federal Board of Revenue (FBR) promulgated the regulations in respect of the Designated Non-Financial Businesses and Professions (DNFBPs) through SRO 924 (1) dated September 29, 2020.
With the implementation of this SRO, the FBR has surprisingly held answerable the most illiterate sector of the economy that is real estate consultants providing services in the field of immovable assets. The Real Estate Consultants are being pushed to do the task that they are otherwise not suited and liable to perform. They argued that the terms such as Customers Due Diligence (CDD), Enhanced Due Diligence (EDD) and Simplified Due Diligence (SDD) are vaguely defined in the SRO. The provision into SRO regarding the applicability of AML sanctions on Real Estate Consultants in case they fail to do Know Your Customer (KYC) as per defined parameters tantamount to ruthless penalization of the consultants.
When contacted, Secretary General Real Estate Consultants Association DHA Ahsan Malik on Monday said that Prime Minister Imran Khan is talking about facilitation of real estate sector by providing amnesty scheme but the FBR is penalizing it, so first of all there should be clarity in the policy of the government.
He said that the real estate could not fulfill such harsh conditions as they could not ascertain about the real potential of their client on the basis of which they are supposed to generate STRs. He proposed to the government that one FBR official should be deployed in all property registration offices across the country.
He also proposed to the FBR for providing a standard performa keeping in view ground realities as it should be so simple and brief that everyone could easily fill it in order to comply with international requirements.
