Identity Theft and Benami Law in Pakistan – Opinion

Readers can test their vocabulary before reading this article by wondering what the word “benami” means in everyday language. Many people may never have heard this word and many of us despite hearing it do not know its meaning leaving behind few people who know about this word and its meaning. “Benami” is a Persian word meaning “in the name of another”.

Benami transaction is basically a financial transaction in which the real ownership of the assets is stolen by a person by keeping the assets in the name of another person or a fictitious person who does not exist at all. This practice is essentially identity theft, eyewash and a smokescreen where the true owner of an asset hides their identity behind another name.

Although it is not possible to understand benami transactions through an example, it would be very helpful. Mr. A is a wealthy person and has sufficient resources to buy a house for his own use. However, he does not buy this house in his own name but in the name of his servant, driver or his friend Mr B.

In this transaction, where Mr. A, who paid the consideration, has possession of the house, lives in it and derives profits from the house is the true owner of the house and referred to as the beneficial owner. On the other hand, Mr B who neither paid the consideration nor owned the house nor derived any profit from this house but appearing as owner in the ownership documents is “Benamidar” whose name was used by Mr A. In In this example, Mr. A is the beneficial owner, Mr. B is benamidar and the house is benami property.

There can be various reasons for executing benami trades, such as why a person, despite having funds, does not hold assets in their own name. Perhaps he has earned this income from illegal sources and if he keeps this property in his own name, he could be apprehended. Perhaps he earned this income through legitimate sources but did not pay the tax and wants to hide this asset from the tax authorities.

Perhaps he is getting married a second time and wants to hide the assets from the first members of his family. Maybe he is not eligible to buy a house in a government housing corporation due to quotas and he is not a civil servant but has money and buys a house there using the name of an official against his quota. The list of reasons for executing Benami trades is endless.

Benami transactions have been prevalent in the Indo-Pakistani subcontinent for centuries, however, these transactions are highly risky and problematic. For example, in the given example, if Mr. A predeceases Mr. B, the legal heirs of Mr. A who actually own the house will have to bring a civil action in court to obtain this house by proving that Mr. A was the current owner of the house and they are the legal heirs of the deceased Mr.

They can only do this if they know that Mr. A owned that house in MB’s name. If they don’t know that Mr. A owned a house in Mr. B’s name, they can never get ownership of it. of this house by deed of succession because this property was not included in the remains of the deceased’s patrimony.

Similarly, if the legal heirs of Mr. B know the ownership of the house, they can opt to own the house in their name through a deed of succession because the house already appears in Mr. B’s name. in the property documents. Conversely if Mr B dies before Mr A then Mr A will have to go to great lengths to recover the property in his name. This would lead to a cycle of litigation and the courts would begin to be burdened with lawsuits.

Despite the risky nature of the transactions, there was no legal prohibition in the past to execute such transactions until February 17, 2017, when this practice was finally declared as an offense in Pakistan through a piece of legislation, namely the “Benami Transactions (Prohibition) Act”. , 2017”. Now people can’t keep their assets in the name of others and if such a transaction is executed, not only is that asset likely to be confiscated in the name of the federal government, but the parties involved are also likely to be charged. of criminal offence. However, some exemptions were provided by law and an amnesty was also granted in 2019 on Benami’s assets.

To enforce this law, the Benami Transactions (Prohibition) Rules 2019 have also been developed. Administratively, Pakistan has been divided into three zones, namely Islamabad zone, Lahore zone and Karachi zone. Each zone has its own jurisdiction and is headed by a commissioner who is assisted by investigators. Three areas have already started work and more than a hundred references have been submitted for tender. Zones are getting information about Benami transactions from multiple sources and investigations are ongoing. The main source of information on benami transactions is complaints from the public, which are received directly or through the Prime Minister’s portal.

This law is a reversal and a legal fence against benami transactions has been erected. In the past, where a beneficial owner would bring a civil action in court to recover title to benamidar, he has now become the defendant under benami law. Before the application of this law, when the beneficial owner won the civil lawsuit in court, he had the right to obtain the title of benami asset in his name. However, after the application of the benami law where it is determined that a person holding assets in the name of another is a defendant and after fulfilling all legal requirements, the benami asset will become the property of the federal government instead of the beneficial owner.

Since the law has been enforced and holding assets in the name of others is now an offense and if a beneficial owner files a claim for beneficial ownership of an asset in court, it is a an offense likely to be recognized under the benami law if this fact comes to the knowledge of the authorities responsible for the execution of the benami law or brought to their attention.

After the enforcement of this law, where people will gradually know that their claim of benami assets in court is a recognizable offense under benami law, not only will the burden of litigation begin to reduce, but benami transactions will also begin to be eliminated.

So far, the benami transactions that have been identified by Benami Zones are transactions in agricultural land, land and residential houses, bank accounts, luxury vehicles, stocks and commercial transactions. The application of the benami law would also lead to the taxation of the right person, the resolution of inheritance problems, the reduction of the burden of litigation in civil courts and appellate courts and the elimination of financial crimes committed through identity theft.

(The author is the FBR tax commissioner)

Copyright Business Recorder, 2022