CA, CS handling client money in PMLA ambit; FinMin notifies rules

Source: The post is based on the article “CA, CS handling client money in PMLA ambit; FinMin notifies rules” published in Business Standard on 5th May 2023

What is the News?

The Union Finance Ministry has notified changes to the Prevention of Money Laundering Act (PMLA).

What are the changes brought by the government in the PMLA Act?

The Finance Ministry has brought in practising chartered accountants, company secretaries and cost and work accountants carrying out financial transactions on behalf of their clients into the ambit of the Prevention of Money Laundering Act (PMLA). This is done for select activities done on behalf of clients.

The notification covers a) buying and selling immovable property; b) managing client money, securities, and other assets; c) managing bank, savings and securities accounts; d) organising contributions for creating, operating, and managing companies, and creating and managing limited-liability partnerships or trusts; and e) buying or selling business entities.

CAs, CSes, and CWAs have been designated reporting entities in the context of such transactions They are required to complete the KYC protocols for all clients on whose behalf they conduct these specified transactions and maintain records of them.

The notification clarifies the provision of regular services — such as certifying accounts or financial advice rendered for a fee — will not come within the purview of the Act.

What is the significance of these changes?

The move aims at curbing fraudulent practices by which accountants allegedly help their clients to launder money.

These changes are also expected to aid investigative agencies further in their probe against dubious transactions involving shell companies and money laundering.

What are the concerns raised against these changes under the PMLA Act?

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. Hence, bringing them under the PMLA Act is uncalled for.