The Union finance ministry issued a gazette notification that brought the “financial transactions” of practicing accountants under the ambit of the Prevention of Money Laundering Act (PMLA). The move aims to tighten the Centre’s control over these professionals and curb fraudulent practices allegedly carried out by accountants to help their clients launder money.
As per the new rule, chartered accountants, company secretaries, and cost and works accountants managing their clients’ money will now be considered reporting entities and will have to undergo the Know Your Company (KYC) process before commencing work. The PMLA requires reporting entities to maintain a record of all transactions and furnish them to financial intelligence units (FIUs).
The notification mandates that accountants must examine their clients’ ownership and financial position, including their sources of funds, and record the purpose behind conducting the transaction. The financial transactions that come under the scope of the PMLA include buying and selling any immovable property, operating and managing companies, limited liability partnerships or trusts, and buying and selling business entities.
Furthermore, managing client money, securities, or other assets, bank, savings, or securities accounts, and organizing contributions for creating, operating, or managing companies will also come under the purview of the PMLA. If a client’s transaction appears suspicious or involves the proceeds of a crime, the reporting entity must step up monitoring future business relations.
According to Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm, “setting up companies by chartered accountants, company secretaries, and cost and works accountants have come under PMLA due to a few unfortunate incidents. The Act is stringent, and compliance is very onerous.”
