Follow-up meeting scheduled in Islamabad next week
The government is thinking of tightening the noose on who can do property deals by introducing a license system for real estate agents in Pakistan.
The move is a part of Pakistan’s efforts to exit the gray list of Financial Action Task Force (FATF), an inter-governmental body that combats threats to the international financial system. The grey list refers to countries or jurisdictions under increased monitoring because of strategic AML and CFT deficiencies.
After being placed on the grey list in June 2018, Pakistan had developed an action plan with the FATF to address those deficiencies. This includes demonstrating that Designated Financial Businesses and Professions like real estate agents are being monitored for compliance with proliferation financing requirements and that sanctions are being imposed for non-compliance.
Money laundering is a major concern and Pakistan has one year to clamp down on it. Real estate is one sector where money laundering is rampant as people park their black money in plots.
But now the government is working on a system to ensure that only registered and licensed dealers will be able to do transactions related to property.
At a meeting between property dealer representatives, the FBR and FATF cell officials in Islamabad last month, it was decided that property dealers would not transact property with 4,500 people on the UN terrorist list. They will also inform the government if the people on the list contact them for property. The participants of the meeting were informed that an app is also being developed as a way to confirm if property is being cleanly bought or sold. Property dealers were told to compile records of all property transactions.
A follow-up meeting is scheduled in Islamabad in the next few days with the following agenda: a review of the registration of property dealers, the purchase and sale data form and the proposed app for the verification of buyers and sellers.
According to Zubair Baig, the president of the Defense and Clifton Association of Real Estate Agents, they had discussed a licensing procedure for real estate agents so that only official ones can do transactions. Baig told SAMAA Money that about 50,000 real estate agents file taxes but non-filers are double that number. Some of them work in liquor stores, some in general stores and some open shops and work as property dealers. There is no licensing system for property dealers in Pakistan which causes problems, he said. According to him, at the last meeting, the FBR said it was working on changing this.
The FBR is registering tax-filer real estate agents under the Designated Financial Businesses and Professions, according to which 22,000 filer property dealers have been registered so far. At the same time, the FBR is looking for people whose income comes out of the tax net through property transaction records.
While commenting on these developments, property dealer Mansoor Moneem said that he believed that real estate agents should be registered and their service charges should be adjusted. The capital used in the property should also be declared. There is nothing wrong with that, but the tax rate should be lower because business conditions are not so good.
In its latest review, which happened in June 2021, the FATF decided to keep Pakistan on its grey list. “The Pakistani government has made substantial progress in making its counter-terrorist financing systems stronger and more effective. It has largely addressed 26 out of 27 items on the action plan it first committed to in June 2018,” the forum’s president, Dr Marcus Pleyer said at the time. Pakistan has made progress, but still fell shorty of fully complying with the FATF’s action plan. It needs to exit the grey list because a potential downgrade to the blacklist has serious implications for the country. Being on the blacklist means the country’s banking system will be regarded as one with poor controls over AML and CFT.