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CAAs and Other Professionals to Report Financial Transactions Under PMLA

In a significant development, the Indian government has expanded the scope of the Prevention of Money Laundering Act (PMLA) to include Chartered Accountants and other professionals as Reporting Entities. This means that if these professionals execute specific financial transactions on behalf of their clients in the course of their profession, they will now be required to report such transactions under the PMLA.

Cooperation with Government

The Institute of Chartered Accountants of India (ICAI) has assured cooperation with the government and will raise awareness among its members about their obligations under the PMLA. While no specific rules have been notified yet, the ICAI is expected to issue guidelines to its members soon.

AML Measures for Non-Regulated Sectors

It is worth noting that while there are no specific legal obligations for non-regulated sectors to implement Anti-Money Laundering (AML) measures, it is prudent for them to do so to mitigate AML risks.

Regulatory Bodies Responsible for AML Compliance

In India, the following regulatory bodies are responsible for dealing with money laundering activities:

  • Reserve Bank of India (RBI)
  • Securities and Exchange Board of India (SEBI)
  • Insurance Regulatory and Development Authority of India (IRDAI)

These bodies can initiate civil and criminal actions against violators of the PMLA, PML Rules or regulatory rules/guidelines.

Government Agencies Responsible for AML Enforcement

The following government agencies are responsible for enforcing and prosecuting the PMLA:

  • Enforcement Directorate (ED)
  • Financial Intelligence Unit (FIU)
  • Reserve Bank of India (RBI)

Statute of Limitations

The FIU does not have a specific statute of limitations for bringing enforcement actions under the PMLA.

Penalties for Non-Compliance

Failure to comply with AML requirements can result in:

  • Monetary penalties of up to INR 100,000 per failure
  • Non-compliance with customer identification, Know Your Customer (KYC), and reporting of certain transactions is subject to penalty provisions

Besides monetary fines, the PMLA also provides for criminal sanctions, including:

  • Imprisonment
  • Attachment of property involved in money laundering
  • Seizure or freezing of properties
  • Freezing of funds or economic resources

Sanctions

The PMLA provides for a range of sanctions against individuals and legal entities, including:

  • Imprisonment
  • Monetary fines
  • Attachment of property
  • Seizure or freezing of properties
  • Freezing of funds or economic resources

These sanctions are primarily criminal in nature.