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CA, CS and CWAs are now under the purview of PMLA


Chartered accountants, company secretaries, and cost and work accountants, that carry out financial transactions on behalf of their clients, have now been brought under the purview of Prevention of Money Laundering Act (PMLA). This was announced in a notification from the Ministry of Finance dated May 3.

The finance ministry said the following activities by above-mentioned professionals will come under the money laundering law – buying and selling of immovable property, managing client money/securities/assets, management of bank/saving or securities account, creating and operations of companies/LLP/trust, and buying and selling business entities on behalf of their clients.

The broadening of the scope of money laundering law is supposed to  strengthen the process of due diligence and corporate governance done by practicing professionals, and tackle the menace of money laundering and related malicious activities.

Gurugram-based Rajesh Ahuja, a practicing chartered accountant, told Entrackr that the notification is a bit unclear as professionals can conduct the due diligence and the PLMA will only be enforced when the personal involvement in any wrongdoing is seen. Also, professionals are supposed to comply with the responsibilities mentioned in the respective law.

Ahuja, however, added the move will help curb involvement of such professionals in creation and operation of shell companies, causing losses to the government exchequer. Overall, it is a good strategy to stop money laundering, he said.

It may be recalled that the central government last year recommended disciplinary action against 400 chartered accountants and company secretaries for their alleged role in incorporating shell companies by flouting norms and rules.

There is no doubt that the government’s relationship with these professionals can be a little testy at times, as the government in recent years has taken to blaming them for helping  clients evade taxes and worse. However, industry has countered with the view that as long as it is within the purview of the law, they cannot be blamed really.

The reality of course is that for many firms, this level of involvement can be their only selling point in case of smaller firms, while larger firms make fat fees for ‘consulting’ work by opening up such pathways. A spate of raids and action against GST evaders and fraud rackets in recent months also indicates some serious expertise at work in these schemes, which might be one reason the government has taken the easy way out of targeting the probable source for now in its view.

Unfortunately, the most obvious and common sense option, of simplified tax regimes and transparent processes still seems to evade everyone’s attention, as any tax payer will tell you.  Perhaps because it is these very rules that keep an army of accountants in business and busy too. One hopes we will get around to relooking this approach too at some stage, rather than  seeking to criminalise more and more actions and even genuine mistakes. 

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