To rein in fraudulent acts, Centre brings accountants under PMLA

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The Prevention of Money Laundering Act, the piece of legislation that has been under a lot of discussion in the recent past, is set to gain more teeth with the Centre bringing financial transaction by practising accountants undertaken for managing companies. The transaction carried out while buying and selling companies will also come under the periphery of the legislation. The gazette notification to this effect was issued on May 3.

Money Laundering is a crime that undermines the economic fabric of the society and promotes other offences such as terrorism and drug trafficking and has been causing the government a lot of worries recently.

The objective of the latest modification is to create and maintain a footprint of all transaction that are executed by accountants and company secretaries. PMLA enjoins all participants to keep record of all transactions and pass them onto financial intelligence units for probable scrutiny.

In short, it would prevent possible money laundering by people with the help of professionals such as CAs and company secretaries.

The new rule would require all professionals linked to these activities – company secretaries, cost accountants and chartered accountants – to navigate the Know Your Company procedure before they can undertake such assignments.

It would bring a host of activities under the scope of PMLA. These include buying and selling immovable property, managing money of clients managing securities and other assets, bank accounts, accounts of securities, organising contributions.

The legislation asserts that the reporting entity – the practising professionals – will need to examine prospective transactions if any transaction seems to be suspicious.

Describing the new stipulations as “stringent”and compliance “onerous”, tax partner of AKM Global, Amit Maheshwari was quoted saying, “Due to a few unfortunate incidents, services such as setting up companies by chartered accountants, company secretaries and cost accounts have come under PMLA.”

The Prevention Of Money Laundering Act (PMLA) formulated in 2002 underwent various critical modifications to equip it better to deal with the offence and teeth to deal with the offenders.

Money laundering refers to conversion of illegally obtained money. It was legislated in response to the country’s commitment to the Vienna convention to combat the menace.