CA, CS handling client money in PMLA ambit


CA, CS handling client money in PMLA ambit

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

What has changed?

o The Finance Ministry has brought in practising CA’s, CS’s and CWA’s 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.
o 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.
o 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.
o 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.

Why was it necessary?

o It aims at curbing fraudulent practices by which accountants allegedly help their clients to launder money.
o It will help investigative agencies further in their probe against dubious transactions involving shell companies and money laundering.
o To fulfil the Financial Action Task Force (FATF) assessment, which is due in November (Last assessment was done in 2010)
o To make these professionals equally responsible for specified transactions made under the PMLA.

Concerns raised by these professionals:

o The PMLA Act is very stringent and compliance is very burdensome. While the conviction rate in PMLA is very low, the entire process is extremely difficult to go through.
o They argue that they are regulated by professional bodies set up under various Acts of Parliament.
o Lawyers and legal professionals have been kept outside the new provision.

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