Beneficial owners of Benami accounts to face music: FBR

ISLAMABAD: After refusal of Pakistan Banking Association (PBA) for updating Know Your Customer (KYC) requirements on account of beneficial owner in the light of Benami law, the FBR has warned of having dire consequence for the beneficial owners of accounts and also for those maintaining such accounts under the Benami law.

In a letter written to the secretary PBA, FBR Chairman Shabbar Zaidi stated that there could be severe consequences under the Benami law not only for the beneficial owner of the Benami accounts but also for the person maintaining or holding such accounts.

The letter from the FBR chairman communicated that the Board fully takes into account suggestions that present KYC/CDD (Know Your Customers/Customers Due Diligence) requirements as prescribed by the State Bank of Pakistan (SBP) achieve the desired goal identified in letter dated August 8, 2019. However, keeping in view the restrictive nature of ‘Benami law’ it is desirable that there should be a positive statement in all KYC/CDD prescription that: “The account holder/depositor is the beneficial owner of sums deposited in a bank account/transactions undertaken in a bank account.”

“We consider that aforesaid statement does not form part of KYC/CDD requirement. It would be agreed by PBA that aforesaid amendment be made part of the KYC/CDD prescription,” the FBR chairman stated.

He added, “We reiterate our comments that there are severe consequences under the Benami law not only for the beneficial owner of the Benami accounts but also for the person maintaining or holding such accounts.”

Although, the Benami law has already enacted, but the FBR had not yet fully made it operational. However, the tax machinery had started collecting the required data that would help to make this law operational in effective manner in months ahead. With the approval of the cabinet, the benches under Benami law were approved and could be notified any time after receiving of official minutes of the cabinet meeting.

Under the KYC/CDD requirements to comply with the FATF conditions in order to combat money laundering and terror financing, there is need for banks for identifying the customer and verifying the customer’s identity on the basis of documents, data or information obtained from customer or through reliable and independent source, identifying, where there is a beneficial owner who is not the customer, the beneficial owner and taking adequate measures to verify his identity so that the bank is satisfied that it knows who the beneficial owner is, including, in the case of a legal person, trust or similar legal arrangement, measures to understand the ownership and control structure of the person, trust or arrangement understanding and, as appropriate, obtaining information on the purpose and intended nature of the business relationship; and monitoring of accounts/transactions on ongoing basis to ensure that the transactions being conducted are consistent with the banks knowledge of the customers, their business and risk profile, including, where necessary, the source of funds and, updating records and data/information to take prompt action when there is material departure from usual and expected activity through regular matching with information already available with banks.