CA UNDER PMLA - GOVERNANCE
News: Chartered
accountants now under ambit of money laundering law
What's in the news?
● Notifying
changes to the Prevention of Money Laundering Act, the Finance Ministry has
brought in practicing chartered
accountants, company secretaries, and cost and works accountants carrying out
financial transactions on behalf of their clients into the ambit of the money
laundering law.
Key takeaways:
● Lawyers
and legal professionals, however, seem to have been kept out in the new
definition of entities covered under the PMLA.
PMLA Amendment 2023:
1. Defines Politically Exposed Persons:
● The
new clause in the rules for PMLA compliance defines “Politically Exposed
Persons” as individuals who have been “entrusted with prominent public
functions by a foreign country, including the heads of States or Governments,
senior politicians, senior government or judicial or military officers, senior
executives of state-owned corporations and important political party
officials”.
2. Uniformity in KYC norms:
● The
move will bring uniformity with a 2008 circular of the Reserve Bank of India
(RBI) for KYC norms/anti-money laundering standards for banks and financial
institutions, which had defined PEPs in line with FATF norms.
● The
due diligence documentation requirements, which were until now limited to
obtaining the basic KYCs of clients such as registration certificates, PAN
copies and documents of officers holding an attorney to transact on behalf of
the client, have now been extended.
● The ED is the main agency
probing allegations under PMLA.
3. Lowers the threshold:
● The
amended rules also have lowered the threshold for identifying beneficial owners
by reporting entities, where the client is acting on behalf of its beneficial
owner, in line with the Companies Act and Income-tax Act.
○ The
term ‘beneficial owner’ are those with the entitlement of more than 25% of
shares or capital or profit of the company, which has now been reduced to 10%.
4. Registration on DARPAN Portal:
● Reporting
entities are now required to register details of the client if it’s a
non-profit organization on the DARPAN portal of NITI Aayog.
● If
not already registered, and maintain such registration records for a period of
five years after the business relationship between a client and a reporting
entity has ended or the account has been closed, whichever is later.
5. Inclusion of Virtual Digital Assets:
● Virtual
digital assets (VDA) trade has been brought under PMLA. As of now,
cryptocurrencies are unregulated in India, though the government has taxed
their withdrawals into rupees.
● New rules mandate crypto
exchanges and intermediaries dealing in virtual assets to maintain the KYCs of
their clients and report suspicious transactions to financial intelligence
units.
● It
will prevent the misuse of crypto, and NFTs through money laundering and other
illegal activities.
6. Inclusion of Chartered Accountants:
● The
practicing chartered accountants, company secretaries, and cost and works
accountants carrying out financial transactions on behalf of their clients.
Go back to basics:
Prevention of Money Laundering Act, 2002:
● The
Prevention of Money Laundering Act is a criminal law of the Parliament of India
passed in 2002 to prevent money laundering and confiscate property derived from
the laundered money.
● The
act was amended in 2019 to further empower the Enforcement Directorate in
dealing with money laundering cases.
Agencies Responsible:
● The
Enforcement Directorate (ED) is
responsible for investigating offences under the PMLA.
● Financial Intelligence
Unit – India (FIU-IND) is the national agency
that receives, processes, analyses and disseminates information related to
suspect financial transactions.
Important Sections:
● Section
45 of the PMLA Act makes it difficult
for the court to grant bail/anticipatory bail to the accused once the
anti-money laundering law was slapped on the person.
● Section
4 says that the offences under PMLA Act are to be treated as cognizable and non-bailable.
Further Reference: PMLA 2002