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November 9, 2019

FBR wants realtors, jewelers to report suspicious transactions

National

November 9, 2019

ISLAMABAD: The FBR has proposed drastic changes for enforcement of law by binding the real estate agents and jewelers to maintain record of beneficial owners of properties and jewelry and report about all suspicion transactions to tax machinery.

In order to comply with the Financial Action Task Force (FATF) requirements, the FBR issued draft amendments to Income Tax Rules 2002 for ensuring documentation of real estate agents and jewelers.

The FATF teams in their assessment showed concerns that the real estate agents and jewelers sectors which were totally undocumented that could become tool of money laundering and terror financing in Pakistan.

The FBR on Friday issued SRO1320(1)2019 for issuing draft amendments to the Income Tax Rules, 2002. The draft rules stated that the "designated person" or "DP" means jewelers and real estate agents to documents and record where the value of transaction, inclusive of all applicable taxes, duties, rates and cess exceeds Rs2,000,000 in case of immovable property and Rs1,000,000 in other cases.

According to the FBR, the record to be maintained and furnished by the DP under these rules shall be subject to spot inspection by income tax authorities who may be assisted by other law enforcement agencies under section 178 of the Income Tax Ordinance. Where the record is not maintained in the prescribed form, the business licence of the DP shall be suspended forthwith, pending further investigation into the matter. An officer carrying out investigation under sub-rule (2) shall have authorisation under section 175 and 176 of the Income Tax Ordinance 2001.

Where a DP fails to comply with any of these rules, he shall be liable to penalty under Part X and prosecution under Part XI of Chapter X of the Ordinance.

On conclusion of investigation, the officer may submit a report to the Commissioner and make recommendations, inter alia, regarding, cancellation or reinstatement of the business licence; or referral of the matter to specialised external investigating agencies for further investigation under their respective laws.

For reporting of suspicious transactions, the jewelers and real estate agents (DPs) shall mark a transaction as suspicious in the IRIS online system if the DP has reason to believe that the transaction or a pattern of transactions of which the transaction is a part involves funds derived otherwise than from the business activity or assets declared to the income tax authorities or designed to evade any requirement of the Ordinance or to conceal the beneficial owner or his activity.

The (DPs) shall mark a transaction as suspicious if it has no apparent economic or lawful purpose after examining the available facts, including the background and possible purpose of the transaction; or involves financing of terrorism, including fund collected, provided, used or meant for, or otherwise linked or related to, terrorism, terrorist acts or organisations and individuals concerned with terrorism.

A transaction shall be marked as suspicious if the buyer or seller frequently changes bank accounts; uses a bank account other than an account maintained in the name of beneficial owner; makes or receives payment in cash or primarily in cash or maintains a creditor or debtor account with the DP and instructs the DP to adjust the balance of his account against a creditor debtor account of another buyer or seller. The DP shall not disclose the facts to the customer in relation to suspicious transactions.

In case of non-compliance, where the record is not maintained in the prescribed form, the business licence of DP shall be suspended forthwith, pending further investigation into the matter.

Where DP fails to comply with these rules, he shall be liable to penalty under part X and prosecution under part XI of chapter X of Ordinance.

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