India brings chartered accountants, company secretaries under ambit of money laundering law

Individuals who obtained a certificate of practice under section 6 of the Company Secretaries Act, 1980 and practicing individually or through a firm, individuals who have obtained a certificate of practice under section 6 of the Cost and Works Accountants Act, and practicing individually or through a firm, will all be guided by the new law.

The current notification has been issued under section 2(1)(sa) of PMLA, 2002. This section defines person carrying on specified business or profession and already includes Gaming activity, Registration Authority, Real Estate Agents, Dealer in precious metals and stones. Now, CA, CS, CMA has been included in above list for certain transactions. This means that they have now become reporting entity for the purposes of these transactions.

According to experts, as a reporting entity CAs, CS and Cost and Works Accountants, have to do KYC of all clients entering into above transactions and to maintain record thereof.

“ICAI Council already has prescribed a KYC requirement and Standard on Quality Control which lay down quality standards for engagements. ICAI Code of Conduct and Ethical Standards for Members also require auditors of certain class of companies to report on Non-Compliance with Laws and Regulations (NOCLAR). ICAI will conduct awareness program for its members in relation to such financial transactions which are already prohibited on behalf of one's client, in the course of his or her profession. ICAI will also continue to work with the authorities and other regulators so that these changes are implemented in the right perspective and role of Professionals is understood,” said CA. Aniket Sunil Talati, President at ICAI.

However, not all CAs see this move so positively. They say that due to a few unfortunate incidents, services such as setting up companies by CA, CS and CWA have come under PMLA.

“PMLA Act is very stringent and compliance is very onerous. These professionals are already regulated by professional bodies set up under various Acts of Parliament and such measures are uncalled for. Apart from conducting KYC before commencement of each specified transaction, the Act also mandates that the reporting entity shall take steps to examine the ownership and financial position, including sources of funds of the client and to record the purpose behind conducting the specified transaction,” said Amit Maheshwari, Tax Partner at AKM Global, a tax and consulting firm.

The Act also stipulates that in case a transaction undertaken by client appears to be suspicious or involves the proceeds of crime, the reporting entity shall increase future monitoring of business relationship. Failure to meet the foregoing requirements entails imposition of penalty by Director, FIU, under Section 13 of the Act.

Maheshwari also said that Section 14 prohibits any other proceeding, civil or criminal, against reporting entity other than the penalty provided under Section 13.

"However, it will always be open for ED to arraign the reporting entity as an accused for knowingly assisting the main accused in the commission of the money laundering," he added.