Pakistan on Tuesday notified new unrealistically stringent regulations to monitor customers of real estate dealers and developers, jewellers and accountants aimed at fulfilling requirements of the Financial Action Task Force (FATF).
These businesses cannot do business with politically exposed persons until they are sure about the source of their income and they will also have to identify the customer and beneficial owner before conducting a transaction, according to regulations notified by the Federal Board of Revenue (FBR) on Tuesday.
The Designated Non-Financial Businesses and Professions (DNFBPs) regulations are also likely to increase the cost of doing business for real estate agents, jewellers and accountants besides bringing them under additional scrutiny.
The FBR notified the “Anti Money Laundering and Countering Financing of Terrorism Regulations for DNFBPs 2020”, three weeks before the scheduled plenary meeting of the FATF that will decide whether to remove Pakistan from its grey list or extend the enhanced scrutiny period further.
These regulations have been framed after recent amendments to the Anti-Money Laundering Act and Anti-Terrorism Act by parliament.
DNFBPs will “take reasonable measures to establish the source of wealth and the source of funds of customers and beneficial owners identified as a PEP, close associate or family member of a PEP”.
DNFBPs (real estate agents, jewellers and accountants) shall verify the identity of the customer and beneficial owner before establishing a business relationship or conducting occasional transaction, according to the regulations.
The regulations also define a politically exposed person as any individual who is or has been entrusted with a prominent public function either domestically or by a foreign country, or in an international organisation and is or has been head of state or government, senior politician, senior government official, judicial or military official, senior executive of a state-owned corporation and political party official.
Close associates and family members of the politically exposed person would also undergo additional scrutiny at the time of doing any transaction in the realty sector, buying jewellery or managing books.
DNFBPs shall implement appropriate risk management systems to determine if a customer or beneficial owner is a politically exposed person or a close associate or a family member of a politically exposed person, both prior to establishing a business relationship or conducting a transaction, and periodically throughout the course of business relationship, according to the regulations.
Real estate sector players and jewellers will also have to seek a copy of the computerised national identity card (CNIC) issued by NADRA; or Form B or smart/juvenile card issued by NADRA to children under the age of 18 years.
DNFBPs will also perform enhanced due diligence (EDD) before any business relationship and conduction transaction with individuals and companies, when risks are higher.
In order to comply with the Targeting Financial Sanctions imposed by the UNSC, real estate dealers, jewellers and accountants will develop a mechanism, processes and procedures for screening and monitoring customers and potential customers to detect any matches or potential matches with the stated designated/proscribed persons, according to the regulations.
DNFBPs will also have to take appropriate steps to identify, assess and understand their risks for customers, countries or geographic areas, and products, services, transactions or delivery channels.
They will identify and assess the money laundering and terror financing risks that may arise in the development of new products, businesses and practices, including a new delivery mechanism, and the use of new and pre-existent technology.
Record keeping
Real estate agents, jewellers and accountants will maintain record in the form of paper or electronic form or on microfilm.
The record of identification data obtained through CDD, including EDD process, copies of identification documents, application forms, verification documents and other documents along with business correspondence, and results of any analysis undertaken shall be maintained for a minimum period of five years after the business relationship is terminated, according to regulations.
“DNFBPs shall retain such record till disposal of case where transactions, customers or instruments are involved in litigation or the same are required by a court of law or other competent authority,” state the regulations.
“DNFBP shall retain such records until such time as the litigation is resolved or until the court of law or competent authority indicates that the records no longer need to be retained.”
Real estate agents, jewellers and accountants will keep a list of all such customers where the business transaction was refused or needed to be closed either on account of failure of the customer to provide the relevant documents or the original document for viewing as required, stated the regulations.
Real estate agents, jewellers and accountants will also appoint a compliance officer at the management level to implement these regulations.
Published in The Express Tribune, September 30th, 2020.
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