Anti-money laundering law tweaked, chartered accountants become ’reporting entities’

Buying new property, establishing a company and financial transactions executed by chartered accountants, company secretaries, and works accountants on behalf of clients will now be covered under the anti-money laundering law.

The finance ministry has notified changes to the Prevention of Money Laundering Act (PMLA), 2002, widening its lens to include several transactions facilitated by professionals.

They would need to examine the ownership and financial position, including clients' sources of funds, and record the purpose of the specified transaction. They will be liable under the PMLA if they facilitate a transaction that violates the law.

The changes have been made in the sub-clause (vi) of clause (sa) of sub-section (1) of Section 2 of the PMLA, which defines 'relevant persons' and firms covered under the anti-money laundering law. Earlier, the act did not include these professionals. Now, chartered accountants, company secretaries and cost and works accountants have become ‘reporting entities’, according to a report by The Economic Times.

The professionals will now be responsible for activities on behalf of clients such as buying and selling of any immovable property, managing assets, creation, operation or management of companies, limited liability partnerships or trusts, and buying and selling of business entities.

The accountants will need to comply with verification of identity rules, maintain records and furnish information when asked. "The ultimate effect of the recent notification is to ensure that such reporting entities shall maintain the record of all transactions and shall furnish the same to the director, FIU (Financial Intelligence Unit), who exercises the powers under Chapter IV of the Act," Amit Maheshwari, tax partner, AKM Global told Economic Times.

In case a transaction undertaken by a client appears to be suspicious or possibly involves proceeds of crime, the reporting entity will need to step up the monitoring of the business relationship.

Earlier this year, the government had amended rules under the anti-money law, making it mandatory for banks and financial institutions to record financial transactions of politically exposed persons (PEP). The financial institutions or reporting agencies are now required to collect information about the financial transactions of non-profit organisations or NGOs under the provisions of the PMLA.