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Identity theft and benami law in Pakistan

Readers may test their vocabulary before reading this article by asking themselves meaning of the word “benami” in common parlance. Many people might have never heard this word and many of us despite hearing it don’t know its meaning leaving a few people behind who know this word and its meaning. “Benami” is a Persian word which means “in other’s name”. Benami transaction is basically a financial transaction in which real ownership of assets is stolen by a person by keeping the assets in other’s name or a dummy person who does not exist at all. This practice is basically an identity theft, an eyewash and a smoke screen where the actual owner of an asset hides his identity behind another name.

Although it is not possible to understand benami transactions through one example but it would be quite helpful. Mr A is a wealthy person and has enough resources to buy a house for his own use. However, he does not purchase that 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 has paid the consideration, has possession of house, residing in it and taking benefits from the house is the real owner of the house and called beneficial owner. On the other hand, Mr B who has neither paid the consideration nor in possession of house nor taking any benefit from that house but appearing as owner in ownership documents is “Benamidar” whom name has been used by Mr A. In this example, Mr A is the beneficial owner, Mr B is benamidar and the house is a benami asset.

There can be various reasons for executing benami transactions as why a person, despite having funds, does not keep assets in his own name. May be he has earned that income from illegal sources and if he keeps such property in his own name he might be apprehended. May be he has earned that income through legitimate sources but not paid the tax and wants to conceal that asset from tax authorities. May be he marries second time and wants to conceal the assets from his first family members. May be he is not eligible to purchase a house in a government housing society due to quotas and he is not a government servant but has money and purchases a house there by using the name of a civil servant against his quota. The list of reasons for executing benami transactions is unending.

Benami transactions are prevalent in the Indo-Pak sub-continent for centuries, however, such transactions are very risky and problematic. For example, in the given example, if Mr A dies before Mr B the legal heirs of Mr A who are actual owners of the house will have to file civil suit in a court of law to get that house by proving that that Mr A was the actual owner of house and they are the legal heirs of the deceased Mr A. They can only do that if they know that Mr A owned that house in the name of Mr B. If they don’t know that Mr A was having a house in the name of Mr B then they will never be able to get the ownership of that house through inheritance deed because that asset was not appearing in the leftover assets of the deceased. Similarly, if legal heirs of Mr B know the ownership of house they may go for getting ownership of house in their name through inheritance deed as the house is already appearing in the name of Mr B in the ownership documents. Vice versa if Mr B dies before Mr A then Mr A will have to pass through great trouble to get the asset back in his name. This would lead to a litigation cycle and the courts shall start getting burdened by litigation suits.

Despite the risky nature of transactions, there was no legal bar in the past in executing such transactions until 17th February, 2017 when this practice has been finally declared as an offence in Pakistan through a piece of legislation namely the “Benami Transactions (Prohibition) Act, 2017”. Now people can’t keep their assets in other’s name and if such transaction is executed then not only that asset is liable to be confiscated in the name of Federal Government, the involved parties are also liable to be charged with criminal offence. However, some exemptions have been provided by law and an amnesty has also been given in 2019 on benami assets.

To enforce this law, the Benami Transactions (Prohibition) Rules, 2019 have also been framed. On administrative side, Pakistan has been divided into three zones, i.e., Islamabad Zone, Lahore Zone and Karachi Zone. Each zone have its own jurisdiction and headed by a Commissioner who is assisted by inquiry officers. Three zones have already started their work and more than hundred references have been filed for adjudication. Zones are getting information on benami transactions from multiple sources and inquiries are under way. Major source on getting information on benami transactions is public complaints, which are received directly or through Prime Minister’s portal.

This law is a turnaround and a legal fence against benami transactions has been erected. Erstwhile where a beneficial owner filed a civil suit in a court of law to get back ownership title from benamidar has now become the accused under the benami law. Before the enforcement of this law, where the beneficial owner won the civil suit in a court was entitled for getting title of benami asset in his name. However, after enforcement of the benami law where it is established that a person is holding assets in other’s name is an accused and after fulfilling all legal modalities the benami asset will go into the ownership of Federal Government instead of beneficial owner.

Since the law has been enforced and now keeping assets in other’s name is an offence and if any beneficial owner files claim of beneficial ownership of an asset in a court of law, it is a cognizable offence under the benami law if this fact comes to the knowledge of authorities executing the benami law or it is brought into their knowledge. After the enforcement of this law, where people come to know gradually that their claim of benami asset in a court of law is a cognizable offence under the benami law not only the litigation burden shall start reducing but the benami transactions will also start eliminating. So far, benami transactions which have been identified by Benami Zones are transactions in agricultural land, residential plots and houses, bank accounts, luxury vehicles, stocks and business transactions. Enforcement of the benami law would also lead to taxation on the right person, resolution of inheritance issues, reduced burden of litigation in civil courts and appellate courts and elimination of financial crimes committed through identity theft.

Muhammad Faisal Mushtaq Dar, "Identity theft and benami law in Pakistan," Business recorder. 2022-04-03.
Keywords: Law , Economics , Court law , Civil law , Benami transactions , Bank accounts , Tax Authorities , Islamabad , Lahore , Karachi , Pakistan , IMF , GDP

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