Prohibition of Benami transactions: Senate panel approves bill by setting aside key objections

People having Benami assets will face property confiscation, up to seven-year jail term

ISLAMABAD: In a gift to the government, an opposition-dominated Senate panel on Thursday approved the Benami Transactions Prohibition Bill while withdrawing all objections, particularly to the proposal of confiscation of property.

The Senate Standing Committee on Finance and Revenue passed the bill, which after approval of the upper house of parliament would allow authorities to take effective punitive action against those who keep their assets in the name of others to hide the source of income and evade taxes.

After enactment of the law, it will be difficult for everyone, even the future prime minister, to keep assets in the name of third parties.

Anybody found guilty of keeping Benami assets will face confiscation of property, rigorous imprisonment of up to seven years and a fine equal to 25% of fair market value of the property.

The National Assembly has already approved the bill.



However, the Senate committee’s decision to withdraw its objections on the insistence of Finance Secretary Dr Waqar Masood Khan caught many off guard.

The committee had earlier declared that it would not approve the bill in its present shape. Its major objection was pertaining to the clauses of property confiscation and powers to enter any premises and seize documents.

Opposition parties have eight members in the 13-member Senate committee and they have a clear majority that can block any piece of legislation.



The State Bank of Pakistan (SBP) also had almost similar objections, which the committee overruled.

“The SBP does not have the authority to comment on the Benami bill,” commented the finance secretary while arguing that the committee should not entertain the central bank’s recommendations.

The government had proposed in the bill that any property, which is found to be the result of a Benami transaction, would be confiscated.

It had presented the bill in parliament as part of a commitment to the International Monetary Fund in order to curb this practice.

The standing committee also withdrew its proposal of binding the government to implement the law within two months of its enactment. It accepted the government’s proposal that the law will come into force on such date as the federal government may decide by notification in the official Gazette.



The Senate panel withdrew its objections to the confiscation of property after the finance secretary argued that refraining from seizing the property would be tantamount to giving a “whitening scheme” to the criminals.

Foreign currency regime

Meanwhile, representatives of commercial banks opposed changes to the country’s foreign exchange regime in the panel meeting.

Their opposition was in response to Senator Saleem Mandviwalla’s proposal for changes to the Protection of Economic Reforms Act 1992.

He has proposed that authorised dealers - banks, shipping companies, airlines, insurance firms, exporters of goods and services, students studying abroad and visitors abroad - may keep and operate foreign currency accounts. The rest of the accounts should be closed.

He has suggested that all other individuals and entities should not hold foreign currency accounts, as these have become the main source of money transfer abroad and tax evasion.

“Any change in the foreign exchange regime will have colossal implications for the confidence of the market,” said Raheel Ahmad, a representative of Faysal Bank.

He said banks had $6.5 billion in foreign currency deposits, which may be affected due to the proposed changes. “It is not correct to say that banks do not have checks in place on the inward and outward movement of foreign currency,” he said.



Out of the $6.5 billion, about $1 billion were with Habib Bank Limited and average deposit size of the 71,000 foreign currency accounts was just $14,000, said Mohammad Ali, an HBL representative.

He said majority of the foreign currency account holders used the deposits for foreign travel and education fee.

The central bank has already opposed changes to the foreign currency regime. After opposition by the banks, it will be difficult to make the proposed legal changes.

Published in The Express Tribune, December 30^th, 2016.

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