Chartered accountants, company secretaries and cost & works accountants will now have substantial additional compliance burden under the reinforced Prevention of Money Laundering Act, 2002, and could be prosecuted under its stringent provisions for any lapses.
As per a set of rules notified by the finance ministry recently under the Act, these professionals will now be designated as “relevant persons”, implying financial transactions handled by them on behalf of their clients in their professional capacity would be covered under the law.
The broad set of transactions, which these professionals carry out for their clients and will be covered under the new rules include: buying and selling of any immovable property; managing of client money, securities or other assets; management of bank, savings or securities accounts; organisation of contributions for the creation, operation or management of companies, and limited liability partnerships or trusts, and buying and selling of business entities.
Experts said the objective of the new rules is to ensure that as reporting entities they maintain the record of all such transactions and furnish them to the Director of the Financial Intelligence Unit (FIU). They will also have to conduct know your customer norms before starting each specified transaction.
The Act also mandates that the reporting entity will take steps to examine the ownership and financial position, including sources of funds of the client and to record the purpose behind conducting the specified transaction.
Any non-compliance could have serious consequences and they can be booked for assisting in the commission of offence of money laundering, they added.
Amit Maheshwari, tax partner, AKM Global, noted that due to a few unfortunate incidents, services such as setting up companies by CA, CS and CWA have come under PMLA.
“PMLA Act is very stringent and compliance is very onerous. The conviction rate in PMLA is very low, but the entire process is extremely difficult to go through. These professionals are already regulated by professional bodies set up under various Acts of Parliament and such measures are uncalled for.”
Sanket Jain, partner, Pioneer Legal, said under the changes, these professionals have also been made reporting entities under the Act. “Non-compliance and not maintaining records as required could lead them to prosecution under the law,” he said.
Ameet Patel, partner, Manohar Chowdhary & Associates, said the list of the activities covered, they are mostly fiduciary ones where the professional has handled money of the client. “If a transaction is in violation of the PMLA then, in my view, anyone who is involved in that transaction knowingly should rightly be investigated,” he said, adding that it would have been fair if all professionals had been brought under this amendment instead of only CAs, CS and CWAs. “For example, several lawyers too are often seen to be handling such matters on behalf of their clients. But they have not been covered,” he said.