Zeroing in on Benami transactions
In Pakistan, the Benami Transactions (Prohibition) Act, 2017 (Benami Law) was gazetted on 17 February 2017. The Benami Law became effective with the publication of the Benami Transactions (Prohibition) Rules 2009 vide SRO 326(I)/2019 dated 11 March 2019. The Benami Law prohibits a person from entering into a benami transaction, which is defined as:
- a transaction where a property is transferred to a person (a benamidar) but the consideration for such property has been provided or paid by another person and the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration (the beneficial owner);
- a property transaction carried out in a fictitious name;
- a property transaction where the owner of the property is not aware of, or denies knowledge of, such ownership; or
- a property transaction where the person providing the consideration is not traceable or fictitious.
- As the practice of holding benami property – whether moveable or immoveable – in the Pakistani economy plays significant role in enabling tax evasion, money laundering and terror financing, the Benami Law has been implemented to achieve, inter alia, the following objectives:
- to deal with the problem of tax evasion and black money, especially in the real estate sector;
- to ensure that the ultimate beneficial owner and persons who abet or induce any person to undertake benami transactions suffer rigorous punishment;
- to enable tax authorities to seize benami property, including the proceeds from such property and to prosecute those indulging in such activities;
- to bring unaccounted money into the system;
- to shut down channels for the flow of illicit funds, whether proceeds of crime or financing of terror activities; and
- to restore the credibility of Pakistan’s financial system.
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