The Government of India has recently notified that practicing Chartered Accountants (CA), Company Secretaries (CS), and Cost and Works Accountancy (CWA) professionals will now be covered under the Prevention of Money Laundering Act, 2002 (PMLA) if they execute financial transactions on behalf of their clients. This is a significant move in the country's efforts to combat money laundering and terrorist financing.
Money laundering is the process by which criminals conceal the true origin and ownership of illicitly obtained funds or assets by making them appear to be legitimate. Terrorist financing involves providing financial support or resources to terrorist organizations or individuals to facilitate terrorist activities.
The PMLA was enacted in 2002 to prevent and combat money laundering and terrorist financing. It provides for the confiscation of property derived from, or involved in, money laundering or terrorist financing, as well as the imposition of criminal penalties on those engaged in such activities.
Under the PMLA, certain financial institutions, such as banks and financial intermediaries, are obligated to comply with "Know Your Customer" (KYC) and "Anti-Money Laundering" (AML) requirements. However, until now, the PMLA did not explicitly cover professionals such as CAs, CSs, and CWAs who assist their clients in financial transactions.
The recent notification by the Government of India now brings these professionals within the ambit of the PMLA. This means that they will be required to comply with KYC and AML requirements when executing financial transactions on behalf of their clients.
This move is expected to significantly enhance the effectiveness of India's AML/CFT regime by ensuring that professionals who are involved in financial transactions on behalf of their clients are held accountable for their actions. It will also provide law enforcement agencies with greater visibility into the activities of these professionals, making it easier to detect and prevent money laundering and terrorist financing.
It is important to note that the notification does not impose any additional burden on professionals beyond what is already required under the PMLA. Rather, it clarifies that these professionals are already covered by the Act if they engage in financial transactions on behalf of their clients.
The Government's decision to bring practicing CAs, CSs, and CWAs under the purview of the PMLA is a significant step forward in India's fight against money laundering and terrorist financing. This move is expected to strengthen the country's AML/CFT regime and provide greater transparency and accountability in financial transactions executed by these professionals. It is important for professionals to understand their obligations under the PMLA and to comply with them to avoid potential legal and reputational risks.