Page 74 - CMA Journal (Jul-Aug 2026)

A r t ic les S ec t ion

Bene cial Ownership Requirements and e cient information sharing. Stronger
under Income Tax Laws enforcement mechanisms are also essential. The SECP
can use technology and data analytics to identify
Pakistan’s income tax framework has also been discrepancies, while periodic audits and risk-based
strengthened through the introduction of Section supervision can improve compliance and
181E of the Income Tax Ordinance, 2001, requiring e ectiveness.
companies and Associations of Persons (AOPs) to Awareness and capacity building should be
electronically disclose and update bene cial strengthened among companies and professionals
ownership information. Section 2(7A) de nes a responsible for preparing UBO information. The SECP
Introduction The relevant shareholders bene cial owner as a natural person who ultimately has initiated awareness e orts through social media to
In today’s increasingly interconnected global are required to submit owns or controls a company or AOP, directly or encourage concerned companies and individuals to
the declaration within 14
economy, identifying the true ownership and control days of receiving the indirectly, through at least 25% of shares or voting le Form 19 and disclose information on UBOs holding
of companies has become a central concern in notice. Under rights, or exercises ultimate e ective control over its at least 25% interest. Professional accounting bodies,
nancial and legal governance. Ultimate Bene cial Regulation 48(5), the nances, decisions or other a airs. including ICMA, ACCA, ICAP and PIPFA, can further
Ownership (UBO) refers to the natural persons who Board of Directors must Through SRO 1117(I)/2023, the Federal Board of support capacity building through regular CPD
ultimately own or control a business, despite layers of maintain a UBO register Revenue (FBR) introduced Chapter XIIIA, Record of activities, training programmes and seminars. At the
legal entities, nominee shareholders or complex and authorize the CEO, Bene cial Owners, in the Income Tax Rules, 2002. same time, UBO compliance should be embedded
ownership structures. Pakistan’s alignment with director or o cer to Under Rule 83E, companies and AOPs are required to within corporate governance as a strategic
Financial Action Task Force (FATF) standards has been provide information to retain bene cial ownership records for 10 years after responsibility rather than treated merely as a legal
signi cant, with its removal from the FATF grey list in the Securities and the bene cial owner ceases to hold such status. The obligation. Given the cross-border nature of corporate
2022 marking an important achievement following Exchange Commission FBR is similarly required to retain bene cial ownership ownership, greater cooperation with foreign
legislative and regulatory reforms. However, continued of Pakistan (SECP) for records of registered companies and AOPs for 10 years. regulators and adherence to international standards
e orts are required to consolidate these gains and veri cation through Key Challenges in Implementing the are also essential for e ectively tracing bene cial
ensure e ective UBO management as global scrutiny Form 19. Section 452 of ownership.
and compliance expectations increase. the Companies Act, 2017 UBO Regime Conclusion
International Standards and Conventions also requires Pakistani citizens holding substantial Despite signi cant regulatory developments, several UBO transparency is more than a regulatory
challenges remain in e ectively implementing the
International conventions, including the Vienna ownership or interests in foreign companies to disclose UBO framework in Pakistan: requirement; it is an important component of
such holdings or interests within the prescribed
Convention (1988), Palermo Convention (2000), UN period. 1. Complex Ownership Structures: Cross-border Pakistan’s e orts to strengthen nancial integrity and
Convention against Corruption (2003) and the Terrorist entities and layered corporate structures can make corporate accountability. An e ective UBO framework
Financing Convention (1999), emphasize preventing Centralized UBO Registry it di cult to trace ultimate ownership and control. can reduce the risk of illicit nancial ows, prevent the
misuse of legal entities and resources, and enhance
legal entities from being misused for criminal activities. To strengthen compliance and improve access to 2. Limited Awareness: Small and medium-sized Pakistan’s credibility in global markets. As international
Robust UBO frameworks are essential for translating bene cial ownership information, the SECP has companies may have limited understanding of UBO AML/CFT and anti-corruption standards continue to
these treaty commitments into e ective transparency established a centralized UBO registry under the requirements under the Companies Act, 2017 and evolve, transparent ownership structures will become
regimes. Identifying the natural persons behind legal Companies Regulations, 2024. Bene cial ownership Companies Regulations, 2024, resulting in increasingly important. For Pakistan, strengthening
entities helps Pakistan comply with international information is consolidated through the eZ le portal, compliance being viewed as a procedural UBO transparency represents a strategic investment in
obligations and align with broader OECD and FATF along with the relevant regulatory returns and forms. requirement rather than a governance accountability, nancial resilience and economic
standards aimed at reducing corporate anonymity and This initiative aims to provide regulatory authorities responsibility. credibility.
mitigating risks associated with shell companies. and reporting entities with transparent, secure and 3. Enforcement and Veri cation: The e ectiveness of
UBO Requirements under the reliable information and facilitate nancial institutions the framework depends on consistent monitoring, References
Companies Act, 2017 in conducting customer due diligence and meeting veri cation and appropriate penalties for • Pakistan Exits FATF Grey List: https://mofa.gov.pk/
pakistan-exits-fatfs-grey-list#:~:text=The%20engagement%20with%20FA
non-compliance. Weak enforcement can reduce the
KYC requirements.
Section 123A of the Companies Act, 2017, inserted e ectiveness of otherwise robust regulations. • TF%20has,Islamabad%2021%20October%202022
https://www.unodc.org/documents/
Vienna
Convention
(1988):
through the Companies (Amendment) Act, 2020 dated UBO and AML/CFT Compliance 4. Data Accuracy and Reliability: Maintaining archive/imolin/UNres03e.pdf
26 August 2020, introduced the de nition of UBO as a UBO identi cation is closely linked to Anti-Money accurate and updated UBO records requires • Palermo Convention (2000): https://www.unodc.org/documents/
middleeastandnorthafrica/organised-crime/UNITED_NATIONS_CONVENT
natural person who ultimately owns or controls a Laundering and Countering the Financing of Terrorism continuous monitoring of changes in ownership ION_AGAINST_TRANSNATIONAL_ORGANIZED_CRIME_AND_THE_PROTO
company, directly or indirectly, through at least 25% of (AML/CFT) requirements. Financial institutions and and control, which can place signi cant demands • COLS_THERETO.pdf
UN Convention against corruption (2003): https://www.unodc.org/
its shares or voting rights, or exercises e ective control Non-Banking Financial Institutions (NBFIs) are required on companies, directors and regulators. documents/brussels/UN_Convention_Against_Corruption.pdf
through other speci ed means. to conduct Know Your Customer (KYC) procedures Strengthening veri cation mechanisms, improving • Terrorist Financial Convention (1999): https://treaties.un.org/
Regulation 48 of the Companies Regulations, 2024 before establishing relationships with clients or awareness and ensuring consistent enforcement will • doc/db/terrorism/english-18-11.pdf
section 123A of Companies Act, 2017 was inserted vide the Companies
provides procedures for obtaining and maintaining companies. These requirements are aligned with FATF therefore be essential to making Pakistan’s UBO regime (Amendment) Act, 2020 dated 26th August, 2020 :
UBO information. Companies are required to take Recommendation 24, which addresses transparency more e ective and sustainable. https://www.secp.gov.pk/document/companies-amendment-act-2020-g
azette-copy/?wpdmdl=40368&refresh=69e9e76a6806c1776936810
reasonable measures to identify shareholders who and bene cial ownership of legal persons, and The Way Forward
own or control at least 25% of shares or voting rights Recommendation 25, which covers transparency and About the Author: Muhammad Sarfraz Arshad is a Fellow
member of ICMA and an ACCA member with over 22 years of
and obtain prescribed information through Form 16, bene cial ownership of legal arrangements. Pakistan should adopt a multi-dimensional approach experience in public and private sectors, including a tenure as acting
including name, father’s name, CNIC, nationality, Both recommendations emphasize assessing and to fully realize the bene ts of UBO transparency. CEO in a public sector company. He is currently CFO at Craft Industrial
country of origin, residential address, email address mitigating the risks of legal persons and arrangements Technology and regulatory integration can strengthen Co., Saudi Arabia. His expertise spans strategic financial planning,
the centralized UBO registry by connecting it with
regulatory compliance, business development, and international
and the date on which the shareholding, control or being misused for money laundering or terrorist other regulatory bodies and nancial databases financial reporting. He also mentors emerging professionals and
interest was acquired. nancing. through secure APIs, enabling real-time veri cation serves as an ACCA IPSAS Trainer and Corporate Trainer at the Pakistan
Audit & Accounts Academy.
72 ICMA’s Chartered Management Accountant, Jul-Aug 2026