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Thursday March 28, 2024

Ordinances to curb money laundering, implement tax laws soon

The federal cabinet had granted its nod on the proposed presidential ordinance that is aimed at complying with the Financial Action Task Force (FATF) requirement

By Mehtab Haider
December 31, 2019

ISLAMABAD: The government is mulling over options to promulgate another presidential ordinance for introducing heavy penalties against ‘cash couriers’ for the purpose of money laundering/terror financing in a bid to comply with the FATF requirements.

This presidential ordinance will also cover penalties for non-compliance as the FBR plans to impose penalty against those big retailers, restaurants and shopping malls who would refuse to install software known as Point of Sale (POS) at their premises.

“The upcoming ordinance will also include clauses related to government-FBR agreement on different points where they struck agreement in October 2019,” top official sources confirmed to The News here on Monday.

When contacted, FBR Chairman Shabbar Zaidi confirmed that the ordinance would be promulgated probably during this ongoing week for imposing penalties against cash couriers and making government-trader agreement effective.

The sources said the federal cabinet had granted its nod on the proposed presidential ordinance that is aimed at complying with the Financial Action Task Force (FATF) requirements and moving against non–compliant through imposition of penalties.

Pakistani authorities will have to submit replies on 150 questions/clarifications/ points raised by the joint group of FATF till January 8, 2020. The face-to-face meeting of FATF is scheduled to take place from January 21 to 24 at Beijing where Pakistani authorities would defend their report. The final plenary meeting of FATF will be held in February 2020 in order to decide the fate of the country for falling into blacklist or moving from grey to green list or keeping the country on grey list for another extended period of June or September 2020.

The IMF in its latest staff report stated that also, a potential blacklisting by the Financial Action Task Force (FATF) could result in freeze of capital flows and lower investment to Pakistan. Finally, the global economic backdrop poses increasing headwinds and weaker than expected activity may affect growth and current account deficit projections. Against all these risks, the authorities’ steadfast commitment to the programme and decisive policy and reform implementation could lead to a faster recovery.

On FATF requirements, Pakistani authorities assured the IMF in writing that “we are committed to addressing all remaining AML/CFT deficiencies. We have established the National Coordination Committee and FATF secretariat, which have been mandated to complete the AML/CFT action plan agreed with the FATF. With technical assistance from several capacity development providers, including the IMF, we will complete the action plan by end-June 2020 (resetting the end-October 2019 structural benchmark) including with respect to risk-based AML/CFT supervision, terrorist financing investigations of designated entities, confiscation (specifically as regards cross-border currency controls) and targeted financial sanctions on designated entities of concern. By end-March 2020, we will improve AML/CFT measures for (a) FATF Immediate Outcome 9 (pursuing investigations and prosecutions of terrorist financing by UN designated entities of concern); and (b) FATF Immediate Outcome 10 (effective implementation of targeted financial sanctions against their assets), towards a substantial level of effectiveness, in line with the FATF assessment methodology (structural benchmark). In parallel, we will exert efforts to address the deficiencies identified by the 2019 Mutual Evaluation Report of the Asia Pacific Group on Money laundering (APG). In this regard, we have developed a roadmap to prioritise key recommendations and will engage with capacity development providers, including to align the AML/CFT legal framework with international standards. We are also actively pursuing membership to the Egmont Group of financial intelligence units.

Meanwhile, the FBR has given deadline to big shopping malls and restaurants for installing new software Point of Sale (POS) till December 31, 2019 (today) or their premises would be sealed under relevant tax laws.

Alone in Islamabad, the FBR has dispatched tax notices to around 130 big retailers and restaurants and gave them deadline to install POS otherwise they would face the consequences.

According to tax sent-out tax notices, in view of the amendments to Rule X1V-A of the Sales Tax Registration Rules, 2006 read with SRO 1203 (1)2019 dated 10-10-2019, FBR has decided to replace RIMS software with Point of Sales and the information letter in this regard has already been issued to all retailers and restaurants for installation of POS immediately but not later than 25-12-2019.

“In the light of above, since you have failed to install/integrate POS system, you are once again requested to install/integrate POS system immediately but not later than 2:00pm on 31-12-2019.”

“In case of failure, the proceedings under 40C of the Sales Tax Act 1990 may be initiated against you.”

The relevant part of the section is reproduced which states that under 40C the monitoring or tracking by electronic or other means (1) subject to such conditions restaurants and procedures, as it may being fit imposed or specified, the Board may, by notification in the official gazette, specify any registered person or class of registered persons or any goods or class of goods in respect of which monitoring or tracking of production, sales, clearance or stocks any other related activity may be implemented through electronic or other means as may be prescribed (2) from such date as may be prescribed by the Board, no taxable goods shall be removed or sold by the manufacturer or any other person without affixing tax stamps, bound roll stickers, labels (barcodes) etc. in any such form, style and manner as may be prescribed by the Board in this behalf (3) such tax stamps, banderols etc. shall be acquired by the registered persons referred to in sub-section (2) from a licencee appointed by the Board for the purpose against price approved by the Board which shall include the cost of equipment installed by such licencee on the premises of registered persons.

”In this regard, you are once again apprised that the law would take its course till the cut off time at 2:00pm on 31.12.2019, after which you would neither be allowed to sell nor remove the goods from your premises as intended by the legislature, in compliance with the above mentioned, You are, therefore, requested to fulfill your legal obligation by installing/integrating POS system immediately but not later than at 2:00 pm on 31st December 2019.”

“Further, Please note that in case of non-compliance by the due date or contravention, you will be no more eligible for Reduced Rate and input tax shall also be reduced in terms of Section 8B(6) of the Sales Tax Act 1990 apart from legal action as mentioned supra in respect of your business premises u/s 40C of the Sales Tax Act, 1990. Your cooperation in this regard shall be highly appreciated,” the tax notice concluded.