Why Is It Important For Property Dealers To Register With FBR?

About FBR Guidelines For Real Estate Agents
Identify If Your RE Business Is In Scope of AMLA & FBR AML/CFT Regulations?
Transactions Subject & Not Subject To AML/CFT
Purpose Of FBR Guidelines For Real Estate Agents

Aligned with the agenda of the Financial Action Task Force (FATF), the Federal Board of Revenue (FBR) has recently registered more than 20,000 property dealers across the country. The objective of the FATF is to take legal and operational measures to monitor and regulate large-scale financial transactions in order to combat money laundering and terrorist financing. By taking this step, the FBR has not only met another important condition of FATF but also documented a way to identify suspicious investors.

The document released by the FBR, titled “Federal Board of Revenue (FBR) Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Guidelines for Real Estate Agents,” states the purpose to educate real estate agents about the compliance with anti-money laundering (AML) and counter financing of terrorism (CFT) along with its requirements.

Let’s explore more about these guidelines and what will be required of real estate agents and property dealers in Pakistan.

More About FBR Guidelines For Real Estate Agents

One of the most common ways for criminals to launder money in the least traceable way is by flipping it in real estate. Usually, these transactions involve huge sums of money. The government has been working on introducing legislation in this regard to monitor, track and regulate such dealings. Efforts are being made to digitize the system that will make it easier for authorities to crack down on illegal real estate activities. 

The FBR document gives a complete understanding of the AML/CFT and Pakistan’s and legislation regarding property transactions. Moreover, it also explains risk assessment, risk mitigation, customer due diligence, suspicious transaction reporting and record-keeping of real estate transactions.

The government has registered the real estate dealers, who are also tax filers, as Designated Non-Financial Business and Professions (DNFBPs). These property dealers will have to keep a thorough data of their clients, perform due diligence, record their transactions and report cash transactions above PKR 2 million.

How To Identify If Your RE Business Is In Scope of AMLA & FBR AML/CFT Regulations?

FBR Guidelines For Real Estate Agents defines a ‘real estate agent’ under both Anti-Money Laundering Act (AMLA) 2010 and AML/CFT regulations. 

According to AMLA: A real estate agent includes builders and real estate developers performing prescribed services in a prescribed manner.

According to AML/CFT Regulations: A real estate agent includes, builders, real estate developers, property brokers and dealers executing a sale or purchase of real property, participating in a real estate transaction and exercising professional transactional activity for undertaking real property transfer.

So, does your real estate business fall under the purview of AMLA & The FBR AML/CFT regulations or not? You can find out yourself by checking if:

• You are a builder, real estate developer, property broker or dealer
• Any or all of the following:
  • Execute a sale and purchase of a real estate property
  • Participate in real estate transaction capacity
  • Exercising professional transactional activity for undertaking a real property transfer

For further clarity, please know that builders, property developers, brokers and dealers who are working as sole proprietors, companies, partnerships, trusts, foundations, government authorities, housing authorities and defence housing authorities are all real estate agents and subject to AML/CFT regulations. It is also not just limited to the private sector; it covers all the public authorities involved in buying and selling of real estate. 

Transactions Subject & Not Subject To AML/CFT

A piece of land that is immovable and can be owned, transferred, acquired, taxed, registered and rented is termed as “real property.” The table below shows the categories that are subject and NOT subject to AML/CFT.

Purpose Of FBR Guidelines For Real Estate Agents

The purpose of these guidelines is to provide complete knowledge to the real estate agents registered with the FBR regarding compliance to AML/CFT legislation. It also outlines the procedures for identification, verification, due diligence, suspicious transactions and record keeping. While the document provides guidance on procedures, policies and compliance, it also elaborates sanctions for non-compliance.

The issue of money laundering and terror financing is real and global. The FBR has taken this step to identify suspicious activities and lawbreakers that pose a threat to the country as well as the national economy. The FBR has also mandated the same for accountants and jewellers to submit the data of buyers who are spending large sums equivalent to or over PKR 2 million in jewellery and gems. The regulations also apply to the politicians, family members of politicians or anyone who owns a business for the benefit of a public figure.

About FATF

The Financial Action Task Force (FATF) is a policy-making body that has over 200 countries under its jurisdiction where policies of international standard are implemented and administered to prevent any illegal activities. FATF works with the governments of the countries under its jurisdiction to bring regulatory reforms related to money laundering and terrorist financing. The FATF Recommendations developed by the organization is a set of coordinated global responses to prevent crimes and are updated whenever necessary.

About APG

Like FATF, Asia/Pacific Group (APG) is a regional body with the commitment to implement money laundering policies. APG is associated with the FATF and has 41 members. The focus of APG is to ensure that its members implement the FATF recommendations against money laundering and terror financing.

This brings us to the end of FBR Guidelines For Real Estate Agents. Stay tuned to Zameen Blog for more information and updates in the real estate sector of Pakistan.