Jewellery traders bound to retain cash transaction records

KARACHI: The Federal Board of Revenue (FBR) has made it mandatory for jewellery traders to retain record of cash transactions above two million rupees as the government accelerates efforts to document the economy ahead of a decision of the global financial watchdog, sources said on Wednesday.

The new procedures have been issued under laws of anti-money laundering (AML) and combating financing of terrorism (CFT) and to meet conditions of the Financial Action Task Force (FATF).

A jeweler is required to retain record of such transactions for at least five years following the completion of a transaction.

A FATF review is scheduled to come this month to decide whether or not to exclude Pakistan from its grey list of countries with weak AML/CFT regulations. The FATF in October last decided to keep the country in the grey list till February 2021 with directions that the country should comply with all the conditions. Bringing designated non-financing business and professions into AML/CFT laws is one of the major requirements of the FATF. The FBR in September last notified regulations namely anti-money laundering and countering financing of terrorism regulations for designated non-financing business and professions, which cover real estate agents, jewelers and accountants. The FBR has geared up efforts to enforce the relevant laws to help the country to have a place on FATF’s ‘white list’.

The latest procedure for compliance by jewelers has also been issued to make this segment into money laundering free business.

The sources said a person engaged in the business of precious stones is not subject to AML/CFT if he is selling or buying jewellery below Rs2 million in cash.

According to the FBR’s procedures, if a person / retail merchant who is selling or buying jewellery e.g. rings, bracelets, necklaces and other bodily ornaments may not be a dealer in precious metals and stones in one year or one month, but the person starts selling or buying such items over Rs2 million threshold, in subsequent years or months, the person would be subject to AML/CFT. The FBR interprets the Rs2 million threshold as a cash transaction below threshold amount, if the cash transaction is below Rs2 million but is part of a series of transactions related to the purchase of the same item or items totaling Rs2 million or above.

The revenue body said the business of precious stones and metals may be abused by criminals and terrorists because of a number of factors.

“They can be of very high value, but still very small and therefore very easy to carry, transport and conceal. Transferring ownership does not require any formal registration process unlike for real estate, motor vehicles or share ownership,” the FBR said in a statement. “The holder of the precious stone and metal is the owner and can be held anonymously without a need for records to be kept. In terms of gold, it can be considered as a universally accepted currency and therefore, investing in gold to launder illegal earnings would be easy as well as profitable.” The FBR also has issued similar procedures for real estate agents and accountants.