Sunday, 14 April 2024

Cash paid for immovable property required to be reported under anti money laundering and counter terrorism financing : FBR

Every cash transaction for sale or purchase of housing units worth more than Rs. 2 million must be reported under Anti Money Laundering (AML) / Counter Terrorism Financing (CFT). To comply with the requirements of Financial Action Task Force (FATF). The Federal Board of Revenue (FBR) instructed on Monday. Real estate agents (REAs) have to comply with the requirements of the AML and Counter Financing of Terrorism (CFT) era.

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The FBR said that a Currency Transaction Report (CTR) needs to be submitted. When a developer receives cash or bearer instruments of Rs 2 million or more for the sale of real estate. The developer sells directly to the buyer and receives a direct cash payment. Similarly, a developer pays Rs 2 million in cash and more to buy real estate e.g. Property developers or builders pay for the purchase of development property.

Similarly, a broker receives or pays Rs 2 million or more to use later in the purchase of immovable property. A broker is a buyer’s agent who collects cash for later deposits and / or settlement payments (receipts or the resulting use may meet the threshold of CTR). However, if all financial transactions are by wire transfer, the real estate agent will not be required to file a CTR. If the REA pays the sales staff in cash, or to a supplier, or to purchase an asset such as a motor vehicle, it will not be subject to filing a CTR as no transaction of immovable property.

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The FBR said the reason is that the REAs are subject to FATF standards and the AML / CFT measures are aimed at raising funds from criminal activities due to the large amount of involvement of the real estate sector. Real estate can also involve in financing terrorism because terrorist groups can buy or sell immovable property. There is a definition of REA under both AMLA and AML / CFT regulations, as follows:

A d v e r t i s e m e n t

Anti money laundering Act, Section 2. Specifications (xii) (a)

(a) real estate agents, including builders and real estate developers, when performing the prescribed activities in the prescribed circumstances and manner;

-FBR AML/CFT Regulations for DNFBPs in Section 2.Definitions (n):

(n) “Real Estate Agent” includes builders, real estate developers and property brokers and dealers when execute a purchase and sale of a real property, participate in a real estate transaction capacity and are exercising professional transnational activity for undertaking real property transfer;

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