The recent Central Government notification on extension of Prevention of Money Laundering Act (PMLA), 2002 brings Chartered Accountants (CA), Company Secretaries (CS) and Cost and Management Accountants (CMA) under the purview of the anti-money laundering regulations.
The Central Government, through the recent Gazette publication has notified that the financial transactions carried out by Chartered Accountants, Company Secretaries and Cost and Works Accountants and on behalf of his/her client, in the course of profession, in relation to certain activities will be covered under Prevention of Money Laundering Act, 2002.
Assisting clients in financial transactions related to property, managing finances and assets, and providing services and advice for company formation and management are common activities that practising Chartered Accountants (CAs), Company Secretaries (CSs), and Cost Accountants (CMAs) undertake on behalf of their clients. While these activities are integral to the functioning of businesses and individuals, they also have implications under the Prevention of Money Laundering Act (PMLA).
The professionals may assist their clients in buying and selling immovable property, which involves financial aspects such as due diligence, valuation, tax implications, and structuring the transaction. However, Chartered Accountants, Company Secretaries and Cost Accountants must also ensure that the transaction is compliant with the PMLA provisions. They should verify the identity of the client, maintain records of the transaction, and report suspicious transactions to the relevant authorities. Failure to comply with the PMLA provisions can result in severe penalties.
Managing client finances, including investment advice and portfolio management is another area where CAs, CSs, and CMAs provide their expertise. However, they must also ensure that the funds involved are not derived from illegal sources. They should perform due diligence on the source of funds, identify the beneficial owner, and verify the identity of the client.
CAs, CSs, and CMAs might also assist clients with managing their bank, savings, or securities accounts, ensuring proper record-keeping, tax compliance, and financial planning. However, they should also verify the identity of the client, maintain records of the transactions, and report suspicious activities to the authorities.
When helping clients set up new businesses or manage existing ones, including handling financial matters related to incorporation, capital structure, and ongoing financial management, CAs, CMAs, and CSs must also be aware of the PMLA provisions. They should verify the identity of the client, maintain records of transactions, and report any suspicious activities to the relevant authorities.
Similarly, while providing services related to the formation and management of different types of legal entities, such as corporations, LLPs, and trusts, CAs, CMAs, and CSs must also ensure that the transactions are compliant with the PMLA provisions.
Lastly, CAs, CMAs, and CSs may also be involved in the financial aspects of mergers and acquisitions, business sales, or transfers, including valuation, due diligence, deal structuring, and tax planning.
While undertaking the above mentioned transaction for the clients, the professionals must be aware of the anti-money laundering regulations and perform due diligence to ensure that the transactions are not linked to illegal activities.
As per Section 2(1)(sa)(vi) of the PMLA, the Central Government notified a select few activities when they are performed for or on behalf of another natural or legal person. The news notification brings Chartered Accountants, Company Secretaries and Cost and Management Accountants under the purview of the said provision.
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