The finance ministry has introduced new changes in anti-money laundering laws in the country and issued a notification in this regard. The ministry has brought in chartered accountants (CAs), company secretaries (CSs), and cost and works accountants (CWAs) under the ambit of the Prevention of Money Laundering Act (PMLA). However, lawyers and legal professionals have been kept out of the new definition of entities covered under the Act.
What Are the Changes In the PMLA Rules?
Through a notification on May 3, the government has brought in the following financial transactions carried out by practising CAs, CSs, and CMAs on behalf of their clients under the scope of the PMLA:
The central govt has notified the following five activities carried on by practising CAs, CSs, and CMA, for its client under Section 2(1)(sa)(vi) of PMLA 2002 i.e. “person carrying on designated business or profession”:
- Buying and selling of any immovable property;
- Managing client money, securities or other assets;
- Management of bank, savings or securities accounts;
- Organisation of contributions for the creation, operation or management of companies;
- Creation, operation or management of companies, limited liability partnerships or trusts, and buying and selling of business entities.
Who Have Been Brought Under The PMLA Law?
- An individual who obtained a certificate of practice under section 6 of the Chartered Accountants Act, 1949 (38 of 1949) and practising individually or through a firm, in whatever manner it has been constituted;
- An individual who obtained a certificate of practice under section 6 of the Company Secretaries Act, 1980, (56 of 1980) and practising individually or through a firm, in whatever manner it has been constituted;
- An individual who has obtained a certificate of practice under section 6 of the Cost and Works Accountants Act, 1959 (23 of 1959) and practising individually or through a firm, in whatever manner it has been constituted.
PMLA: Why Have These Changes Been Brought In?
According to experts and industry players, the government is likely to have brought about the changes in the PMLA rules against the backdrop of rising cases of shell companies. Shell companies are those entities that are registered on papers but have no activity on the ground. Industry players said it has been noticed that CAs, CSs and CWAs have played a key role in the creation of these shell companies.
In March, the government in line with the FATF’s recommendations had also widened the ambit of reporting entities under money laundering provisions to incorporate more disclosures for non-governmental organisations and defined politically exposed persons (PEPs) under the PMLA.
Amit Maheshwari, tax partner at tax and consulting firm AKM Global, said, “Due to a few unfortunate incidents, services such as setting up companies by CA, CS and CWA have come under PMLA. The 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.”
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