Including Professionals (CA CS CMA) under PMLA: A Boost for India's AML/CFT Efforts

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.

The inclusion of practicing Chartered Accountants (CAs), Company Secretaries (CSs), and Cost Accountants (CMAs) under the Prevention of Money Laundering Act (PMLA), 2002 is indeed a noteworthy and strategic development in India's efforts to combat money laundering and terrorist financing.

Here's a breakdown of the key implications and professional insights on this update:

✅ Key Highlights of the Notification

Who is covered?
- Practicing CAs, CSs, and CMAs who execute financial transactions on behalf of clients, particularly in the nature of:
  - Buying/selling immovable property
  - Managing client money, securities, or other assets
  - Managing bank, savings, or securities accounts
  - Organizing contributions for the creation, operation, or management of companies
  - Creating, operating, or managing legal persons or arrangements
Why now?
- The move aligns India’s compliance with FATF (Financial Action Task Force) recommendations.
- It addresses risks arising from professional intermediaries being misused to conceal illicit financial activities.
Obligations of Professionals:
- KYC/AML compliance: Maintain records, identify clients, and report suspicious transactions (STRs) to FIU-IND (Financial Intelligence Unit - India).
- Recordkeeping: Maintain documentation of transactions and clients for at least 5 years.
- Registration: Professionals may need to register with FIU-IND if undertaking the specified financial activities.
- Client diligence & reporting: More stringent risk assessment and due diligence procedures when onboarding clients.

🚨 Impact on Professionals

➤ 1. Legal Compliance

Non-compliance could lead to penalties, criminal liability, and reputational damage.
Professionals must amend their engagement letters, internal processes, and staff training to include AML norms.

➤ 2. Role Redefinition

CAs, CSs, and CMAs are no longer just advisors; they are now "reporting entities" under PMLA in certain circumstances.

➤ 3. Due Diligence Expansion

Even for traditional engagements, professionals will need to check if the activity falls under PMLA purview.
For instance, structuring a company or holding client funds may now trigger compliance obligations.

📌 Practical Tips for Professionals

✅ Conduct a risk assessment of services to identify where PMLA obligations may apply.
✅ Design and implement AML policies and SOPs for client onboarding and reporting.
✅ Train staff and partners on red flags for suspicious transactions.
✅ Update documentation like client declarations, engagement letters, and consent forms.
✅ Register with FIU-IND, if necessary, and ensure periodic reporting.

🧩 Potential Challenges

🔹 Awareness gap among professionals, especially smaller firms.
🔹 Resource constraints for implementing compliance frameworks.
🔹 Fear of misuse: Professionals may be held liable for client actions unless safeguards are in place.

🧠 Conclusion

The move is both a compliance challenge and an opportunity:

Challenge: More regulatory scrutiny and responsibility.
Opportunity: A chance for professionals to build robust, transparent practices and enhance their credibility in sensitive financial engagements.

India is signaling a zero-tolerance stance on money laundering, and the inclusion of CAs, CSs, and CMAs under PMLA shows that gatekeepers of the financial system must now take a proactive role in national security and financial integrity.

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