FBR’s actions on suspicious transactions comply with anti-money laundering law

KARACHI: Federal Board of Revenue (FBR) on Wednesday said action under anti-money laundering law (AML) was taken only on the basis of suspicious transactions reports (STRs), brushing aside the concerns the law was being triggered without any evidence. 

“Financial Monitoring Unit (FMU) generates STR and then sends it to the FBR for further investigation,” Dr Muhammad Iqbal, member (policy) said at a seminar on ‘Anti-Money Launder Laws’ and ‘Benami Laws’ organised by Karachi Tax Bar Association (KTBA). 

Responding to consultants/practitioners’ apprehensions the FBR was acting on its own under AMLs and freezing bank accounts, Iqbal said the objective of the FBR was not to compromise the dignity of taxpayer. He, however, did admit that there were cases in which the notices, sent to the taxpayers, were deficient. 

Regarding green-field investments, he said there were certain exemptions that had been allowed from disclosure of information. “If no predicate offence is identified, then Benami law should not be triggered,” he added. 

Earlier, highlighting the provisions of Anti-Money Laundering Act, 2010, Abid H. Shaban, advocate, Supreme Court of Pakistan, said in order to enforce this law properly secrecy law need to be amended as banks were reluctant to provide information of their accountholders. 

Shaban said that under Section 165A of Income Tax Ordinance, 2001, tax authorities are empowered to take all information of transactions from banks.

“Globally, the quantum of laundered money was around $1 trillion and International Monetary Fund (IMF) has estimated the scale of money laundering to amount between 2 percent and 5 percent of global gross domestic product,” he said. He said that Pakistan had also implemented the AML but the same was needed to be amended. “At present the concealment under sales tax and federal excise laws can be dealt under AML but this law is missing income tax laws,” Shaban added.

He also highlighted that misstatement or false statement had also been incorporated under AML, which was not justified. “The initiative of the government to bust the underground economy resulted in a rise of cash economy, evident from the fact that investments in prize bonds have doubled during last three years to Rs681 billion,” the tax practitioner said.

Shaban informed the seminar that a significant share of increase was amongst high denomination bonds i.e., Rs25,000, which increased from Rs40 billion to Rs102 billion, while Rs40,000 prize bonds jumped from Rs118 billion to Rs194 billion. 

“Interestingly, these bonds are still in short supply in the market,” he said adding, a similar situation was observed in immovable property transactions, where revenue losses had been estimated to be around Rs336 billion during December 2016 to March 2017. 

Syed Shabbar Zaidi, senior partner, M/s AF Ferguson & Co said that Benami and undeclared assets were two different things. “In Pakistan the major issue is undeclared assets not the Benami assets,” Zaidi added. 

He said that Benami Transactions (Prohibition) Act, 2017 was a confiscatory law and it would override the provisions of Trust Act, which allows holding Benami assets in trust. “Similarly, the present Benami act is in conflict with provision of income Tax Ordinance, 2001 which explains taxability on transfers of assets,” Zaidi said.