Section 2 (1) (sa) of the Prevention of Money Laundering Act, 2002 (PMLA) defines ‘persons carrying out designated business or profession’. Sub-section (sa) (vi) grants power to the Central Government to designate any other person as ‘person carrying out designated business or profession’ by way of a notification.
Vide Notification S.O. 2036(E) dated May 3, 2023, the Central Government has designated the following as ‘persons carrying out designated business or profession’:
- Practising Chartered Accountant (CA)
- Practising Company Secretary (CS)
- Practising Cost Accountant (ICWA)
The practicing CA / CS / ICWA can be practising either individually or as a Firm.
The notification is effective from May 3, 2023.
Impact
The key impact of this notification is that the practising CA / CS / ICWA would be considered as a Reporting Entity in terms of Section 2 (1) (wa). In terms of this section, Reporting Entity means a banking company, financial institution, intermediary or a person carrying on a designated business or profession.
Consequently, the CA / CS / ICWA would need to fulfil the following obligations:
- Identify their client/s and the beneficial owners of the client;
- Verify the identity of the client and the beneficial owners;
- Identify the source / end use of funds;
- Maintain record of account files and business correspondence pertaining to the transactions undertaken on behalf of the client;
- Maintain the records referred above for atleast five years;
- Furnish information to the Financial Intelligence Unit, India (FIU), as and when requested.
It is to be noted that the following transactions only have been brought within the purview of the PMLA:
- Buying and selling of any immovable property
- Managing of client money, securities or other assets
- Management of bank, savings or securities accounts
- Organisation of contributions for creation, operation or management of companies
- Creation, operation or management of companies, limited liability partnerships or trusts and buying and selling of business ethics
Way forward
- Under the extant guidelines, Reporting Entities need to register themselves with the FIU. It is expected that the FIU would come across shortly with the guidelines and the time frame for registration of such CA / CS / ICWA.
- The FIU is also expected to come up with the formats in which the reporting needs to be undertaken. Typically, the reporting entities need to file monthly reports and any ad hoc Suspicious Transaction Report, in case of an actual or anticipated suspicious transaction.
- It is expected that the professional bodies i.e. Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) and Institute of Cost and Works Accountants of India (ICWAI) would come up with guidelines which need to be followed by their members for compliance of the new PMLA guidelines.
- Training sessions would need to be organised for the CA / CS / ICWA with respect to the reporting to the FIU.
- It is recommended that the CAs / CSs / ICWAs start identifying and verifying the identity of their new clients as well as existing clients on an immediate basis. Further, they need to start maintaining detailed records of the transactions undertaken by them on behalf of their clients.
The above article provides a general overview on the topic. For further information with respect to the same, kindly contact services@jneela.com.
