Cash, cousins and a corner plot
A registered real estate agent in Islamabad is handling the sale of a commercial plot for PKR 95 million. The buyer, a retired army officer, pays a PKR 4 million cash deposit from a bag and says the rest will come from three bank drafts. The drafts are in the names of two cousins and a family friend, none of whom attends the signing. One cousin is a serving deputy secretary in a provincial government department. The buyer refuses to explain the family arrangement in writing and asks the agent to 'keep it simple' because the seller is in a hurry. The agency has no written AML/CFT policy and has never filed a report. The agent knows the buyer socially and believes the funds are legitimate family money.
1. Explain the agent's CDD, beneficial ownership and PEP obligations in this transaction.
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A real estate agent is a reporting entity under Pakistan's AML/CFT regime, so the agency must conduct CDD even though it is not a bank. The agent must identify and verify the buyer and the seller, understand the purpose and intended nature of the transaction, and identify the beneficial owner of the purchase. The buyer is the client, but the funds are coming from third parties, so the agent must also identify and verify the two cousins and the family friend, understand their relationship to the buyer, and establish the source of their funds. Third-party payments are a recognised red flag because they can disguise the true source of wealth. The PKR 4 million cash deposit is above the PKR 2 million CTR threshold, so a CTR is likely required. The serving deputy secretary may be a domestic PEP depending on the definition used; senior government officials are generally covered. That does not mean the transaction is illegal, but it requires EDD: senior management approval, source of wealth and source of funds checks, and enhanced monitoring. The buyer's refusal to explain the arrangement in writing and his request to 'keep it simple' increase risk. The agent should not proceed until it is satisfied, and if it cannot complete CDD, it should decline the transaction and consider an STR. Social familiarity is not a substitute for verification.
2. What reports and records should the agency make, and what should it do about its missing AML/CFT programme?
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The agency should file a CTR for the PKR 4 million cash deposit if the prescribed threshold is met. It should also consider an STR. The combination of a large cash deposit, three third-party drafts, a PEP connection, a refusal to document the family arrangement and a request for speed is suspicious. The STR should go to the Financial Monitoring Unit promptly, and the agency should not tell the buyer or the cousins that a report has been filed. Tipping off is prohibited. The agency should retain CDD records, certified IDs, the sale agreement, draft instruments, source-of-funds documentation, screening results and the rationale for its decision for at least five years after the transaction or the end of the relationship. Because the agency has no written AML/CFT policy and has never filed a report, it needs a basic programme: board or owner-approved AML/CFT policy, a designated compliance officer, risk assessment, CDD and record-keeping procedures, sanctions and PEP screening, training for staff, and an independent review. It should also register with the relevant supervisory body if required. The agent's personal belief that the funds are legitimate family money is not enough; the agency must be able to demonstrate verifiable evidence. If the buyer will not provide it, the agency should not complete the transaction.