New Delhi: The Indian government has broadened the list of reporting entities under the Prevention of Money Laundering Act (PMLA) to strengthen data collection and combat money laundering, according to an official order.
The expanded list now includes nominee directors, nominee shareholders, partners, and providers of office accommodation without a proper contract meeting certain criteria. These entities join others such as banks and real estate agents in carrying out customer due diligence, record keeping, and reporting suspicious transactions.
Experts have said that the modifications signal the authorities' zero-tolerance stance on issues of money laundering.
Last week, the Revenue Department placed certain transactions by accountants and company secretaries under PMLA, aiming to increase their accountability and liability and alter the methods of transaction due diligence and source of funds examination.
The law defines reporting entities as banks, financial institutions, those operating games of chance for reward, casinos, real estate agents, precious metal dealers and persons carrying on a designated business or profession. It is the last category of reporting entities which has been expanded in the latest two orders.
Persons acting on behalf of another person for formation of companies or limited liability partnerships, acting as a nominee shareholder/director/secretary/partner, or providing an office or accommodation would now be covered under PMLA.
"By widening the scope of PMLA, the government has indicated zero tolerance for the persons supporting money laundering activities in India. These steps would instill a sense of fear in wrongdoers," explained , explained Rajat Mohan, partner at AMRG Associates, an accounting firm.
Those providing a registered office, business address or accommodation, correspondence or administrative address for a company or a limited liability partnership or a trust have now been defined as reporting entity.
The order, however, clarified that any agreement of lease, sub-lease, tenancy or any other agreement for the use of land, building or space and the rent is subjected to tax deduction at source, is not included in this.
The latest order also clarifies the application of PMLA to the certification given by advocates, accountants and company secretaries to Registrars of Companies at the time of registration of a company that it complies with all rules related to registration.
Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm, said that the net effect of this notification is that providing this declaration itself will not make it an obligation for the professional to maintain a record or to report such a transaction.