Bricks and Black Money: The Report America Now Demands and Pakistan Does Not

On 29th August 2024 the United States Financial Crimes Enforcement Network (“FinCEN”) published a Final Rule imposing a nationwide duty to report every non-financed transfer of residential real property to a company or a trust; the reporting instrument is a new form called the “Real Estate Report”, the duty attaches to the professionals who close the deal rather than to any bank, and the rule took effect on 1st December 2025, with compliance postponed to transfers closing on or after 1st March 2026. Peter D. Hardy, whose Money Laundering Watch commentary of 10th September 2024 is the clearest account of the rule, drew attention to its design: a “cascade” of responsible filers, from settlement agent to title and escrow company to the lawyer who prepares the deed, so that one identified person always files; “reasonable reliance” on information supplied by the parties; no full anti-money laundering programme and no continuing duty to file suspicious activity reports; and a separate rulemaking for commercial real estate promised for another day.

The “Corporate Transparency Act”, the centrepiece of the same American reform, was struck down by a District Judge on 1st March 2024 and hollowed out by FinCEN’s own interim final rule of 21st March 2025; yet the property-reporting rule is in field, because even a government dismantling its company register could not deny that the all-cash purchase of real estate is where criminal money goes to sleep.

Pakistan’s favourite sink

Since untaxed and criminal money in Pakistan flows to immovable property more readily than to any other asset therefore the real estate sector is our confessed vulnerability, not a suspected one: the National Risk Assessment of 2019 placed real estate dealers among the sectors most vulnerable to money laundering and terrorism financing, and the Asia/Pacific Group’s Mutual Evaluation Report of October 2019 recorded that Pakistan had no anti-money laundering supervisor for any designated non-financial business and no licensing requirement for real estate agents at all.

The sector absorbs black money so comfortably because the state itself maintains three prices for the same plot: the collector’s rate notified for stamp duty under the Stamp Act, 1899, popularly the “DC rate”; the valuation table which the Federal Board of Revenue (“FBR”) was empowered to notify under Section 68 of the Income Tax Ordinance, 2001 (Ordinance XLIX of 2001) by the Finance Act, 2016, revised in 2019 and 2022; and the actual market price, far above both. The gap between recorded and real value is no accident of administration; it is the laundering margin, and Parliament once blessed it expressly, because Section 236W, inserted by the Income Tax (Fourth Amendment) Act, 2016 on 12th December 2016, allowed a purchaser to pay three per cent on the difference between the FBR value and the registered value and never explain its source, a dispensation withdrawn only by the Finance Act, 2019 from 1st July 2019.

The habit did not die with Section 236W. The Tax Laws (Amendment) Ordinance, 2020 of 17th April 2020 inserted Section 100D and the Eleventh Schedule into the Income Tax Ordinance, 2001, granting builders, developers and those investing in their projects immunity from the source-of-funds enquiry under Section 111; 993 builders and developers registered, and over ninety-five per cent failed to comply with its conditions (FBR figures reported 22nd September 2025). The Benami Transactions (Prohibition) Act, 2017 (Act V of 2017), gazetted on 17th February 2017 to reach property held in other men’s names, waited until the Benami Transactions (Prohibition) Rules, 2019 for its adjudication machinery, and the Federal Appellate Tribunal’s Special Bench at Karachi has now held (ruling reported 12th November 2025) that the Act cannot touch transactions completed before its enactment or assets declared under the 2019 amnesty. The one federal levy that did reach idle property, Section 7E, inserted by the Finance Act, 2022, was struck down by the Federal Constitutional Court on 7th May 2026 as a tax on immovable property, a provincial subject since the Eighteenth Amendment. Very unfortunately, every instrument aimed at the sector has been withdrawn, confined or annulled; the legal treatment of immovable property hence needs serious reconsideration.

Where the reports do not come from

One hundred and twenty-seven.

That is the number of Suspicious Transaction Reports filed by the entire real estate sector of Pakistan in the last quarter of 2022, out of 6,373 received by the Financial Monitoring Unit (“FMU”), Pakistan’s financial intelligence unit under the Anti-Money Laundering Act, 2010 (Act VII of 2010), while the banks filed 4,901 (FMU, Quarterly Report, October to December 2022). The comparison decides the design question: a bank sees a property deal only when the money passes through it, the deals that matter are the ones that never do, and the estate agent, who does see the cash deal, is paid by it and files accordingly.

On paper the duty exists. The Anti-Money Laundering (Second Amendment) Act, 2020, assented to on 22nd September 2020, brought real estate agents, builders and developers within the Anti-Money Laundering Act, 2010 (Act VII of 2010) as designated non-financial businesses and professions, and the new Section 6A made the FBR their regulatory authority, which issued its regulations for the sector by S.R.O. 924(I)/2020 of 29th September 2020. The 127 reports are the measure of what that architecture produces; keeping in view that the same quarter’s 510 FMU disclosures to law enforcement were led by tax crimes, with 99 items, and Hawala and Hundi, with 80, the state functionaries already know where the money is; what they lack, for the reasons best known to successive legislatures, is any record of the transactions carrying it.

A Pakistani “Real Estate Report”

In the light of the American design, the outline of a Pakistani regime writes itself, because every transfer of immovable property here already passes through a recording hand: the transfer branch of a housing authority or cooperative society, or the sub-registrar under the Registration Act, 1908 (Act XVI of 1908). It is urgently required that a “Real Estate Report” be created under the Anti-Money Laundering Act, 2010, filed with the FMU for every non-financed transfer of immovable property above a notified value, and for every transfer, of whatever value, to a company or a trust; that the duty to file run down a “cascade” fitted to our conveyancing chain, from the housing authority’s transfer officer to the sub-registrar to the estate agent to the advocate who drafts the instrument, so that one identified person is always answerable; that the filer be entitled to “reasonable reliance” on the declaration of the “Ultimate Beneficial Owner” which every company already makes on Form 45 under Section 123A of the Companies Act, 2017 (Act XIX of 2017), in field since 26th August 2020; and that, following the American restraint, no full anti-money laundering programme be demanded of offices which could not run one. A report is not a programme; it is a record, and records are what our registries already keep and decline to share.

The purpose of such a report must be understood, for the Honourable Supreme Court of Pakistan has twice marked the boundary. In Shahid Chaudhry v The State (Criminal Petition No.174 of 2026, decided 27th February 2026), following Directorate of Intelligence and Investigation-FBR v Taj International (Pvt) Ltd (PLD 2025 SC 633), the Honourable Supreme Court of Pakistan held that a charge of money laundering is derivative of a determined predicate offence and that criminal law is not a tool for the recovery of money. A “Real Estate Report” therefore feeds intelligence and assessment, not a first information report; it tells the FBR which purchase to assess and the FMU which chain to trace, and the prosecution comes, if it comes at all, after the predicate is determined.

The United States, which drafted the world’s rulebook and has never spent a day on any list, now demands a filed report for every cash purchase of a home by a company or a trust. Pakistan spent from June 2018 to 21st October 2022 on the “Grey List”, raised its technical compliance from thirty-nine per cent in October 2019 to seventy-two per cent by August 2022 (Basel Institute on Governance, 15th December 2022), and still asks for no such report; the deed is registered, the plot file changes hands in the society’s register, and no copy reaches the FMU. Since the recording infrastructure exists and only the reporting duty is missing therefore the reform is legislative, cheap and overdue; and when the next Mutual Evaluation asks where the cash in our property market comes from, a country that cannot answer will not be believed twice.