Finance Ministry brings CA, CS, accountants carrying financial transactions of clients under Prevention of Money-laundering Act

The Finance Ministry has notified changes to the Prevention of Money-laundering Act (PMLA) on Thursday, to bring practicing chartered accountants (CA), company secretaries (CS), and cost and works accountants (CWAs) carrying financial transactions on behalf of their clients, into the ambit of the money laundering law. As per the changes notified, such professionals will be liable to ascertain the correct financial status and ownership details of their clients before dealing with them. As per the changes notified, they must also maintain records of all deals done for their clients and they will be penalised if found to have dealt with funds from illegal sources. 

The changes notified have been made in the sub-clause (vi) of clause (sa) of sub-section (1) of section 2 of the PMLA, which defines different categories of persons covered under the Prevention of Money-laundering Act.

Which activities have been brought under the purview of PMLA?

As per the notification, individuals who are involved in carrying out financial transactions on behalf of their client, would come under the purview in relation to the following activities — 
 
1) Buying and selling of any immovable property;

2) Managing of client money, securities or other assets;

3) Management of bank, savings or securities accounts;

4) Organisation of contributions for the creation, operation or management of companies;

5) Creation, operation or management of companies, limited liability partnerships or trusts, and buying and selling of business entities, shall be an activity for the purposes of said sub-section. 

PMLA: Who all have been brought under the ambit?

As per the gazette notification, the professionals mentioned below have been brought under the purview of the Prevention of Money Laundering Act (PMLA) —

1) An individual who obtained a certificate of practice under section 6 of the Chartered Accountants Act, 1949 (38 of 1949) and practicing individually or through a firm, 

2) An individual who obtained a certificate of practice under section 6 of the Company Secretaries Act, 1980 (56 of 1980) and practicing individually or through a firm, 

3) Individual who has obtained a certificate of practice under section 6 of the Cost and Works Accountants Act, 1959 (23 of 1959) and practicing individually or through a firm.

क्लाइंट्स के लिए कंपनियां खोलने वाले Chartered Accountant (CA), Company Secretary (CS) और कॉस्ट अकाउंटेंट अब एंटी मनी लॉन्डरिंग कानून PMLA के दायरे में आएंगे

वित्त मंत्रालय के 3 मई के एक नोटिफिकेशन में एंटी मनी लॉन्डरिंग कानून #PMLA का दायरा बढ़ा दिया गया है#MoneyLaundering pic.twitter.com/7O28t7ei1A

— Zee Business (@ZeeBusiness) May 4, 2023

PMLA: Why was the change deemed necessary?

As per sources, the move comes at a time when the government is worried about the growing number of shell companies. Thousands of companies that have been registered have no operations to show and their sole purpose is to convert black money into white. Due to multi-layering of ownership and lack of trasparency in such companies, the agencies struggle when they try to trace the real owners of such shell companies. It has also been noticed during investigations that chartered accountants, company secretaries and cost and works accountants have played an important role in the creation of bogus shell companies. The government has taken this step to bring these professionals under the ambit, sources added.