Financial Crime World

Title: India’s Anti-Money Laundering Regulations Expand: New Obligations for Company Representatives and Accounting Professionals

India’s anti-money laundering (AML) framework, established under the Prevention of Money Laundering Act (PMLA) 2002, is continuously evolving to address financial criminal activities. In May 2023, the Indian government introduced amendments to broaden the scope of these regulations, incorporating new entities like company representatives and accounting professionals. In this article, we discuss these developments and the new reporting requirements.

AML Regulations in India: Latest Developments

The PMLA, 2002, and accompanying rules (PML Rules) serve as the foundation for AML efforts in India. Following recent financial crimes, such as the Chinese apps scam, the government introduced revisions to strengthen the regulations.

Revisions to the Regulations

In May 2023, the Indian government extended the application of the PMLA to:

  1. Individuals involved in company formation, including directors and secretaries
  2. Accounting professionals, such as Chartered Accountants (CAs), Company Secretaries (CS), and Cost and Works Accountants (CWAs)

Entities Covered Under India’s AML Regulations

Since May 2023, the following entities fall under India’s AML regulations:

  • Individuals: beneficial owners, directors, secretaries, and related individuals
  • Companies and Limited Liability Partnerships (LLPs)
  • Trusts
  • Non-face-to-face customers
  • Partnership firms
  • Foreign portfolio investors
  • Non-governmental organizations (NGOs)
  • Politically Exposed Persons (PEPs) from outside India
  • Banking intermediaries and financial companies
  • Intermediaries in the crypto ecosystem (crypto exchanges, wallets, etc.)
  • Accounting professionals (CAs, CSs, and CWAs)

Company Representatives and Accounting Professionals: New Reporting Entities

The amendments to the PMLA aim to increase transparency and prevent financial crimes. For instance, new requirements for accounting professionals include due diligence on their clients.

New Reporting Obligations for Accounting Professionals

From now on, CA, CS, and CWA professionals must perform due diligence on their clients, ensuring they meet the following criteria:

  1. Ownership and financial status
  2. Source of funds

Accounting professionals act as reporting entities, managing their clients’ finances and ensuring compliance with AML regulations. By doing so, they help prevent financial crimes, such as money laundering.

Financial Activities Covered Under India’s AML Regulations for Accounting Professionals

  1. Buying and selling immovable property
  2. Managing client money, securities, or other assets
  3. Management of bank, savings, or securities accounts
  4. Organization of contributions for the creation, operation, or management of companies
  5. Creation, operation, or management of companies, LLPs, or trusts, and the buying and selling of business entities

New Reporting Requirements: PML (Maintenance of Records) Amendment Rules

The Prevention of Money Laundering (Maintenance of Records) Amendment Rules, 2023, were introduced in March 2023. These rules obligate reporting entities to provide beneficial owners’ information to the Fugitive Economic Offenders Authority. Moreover, the rules defined politically exposed persons (PEPs) and lowered the identification threshold for beneficial owners to 10%.

Conclusion

The Indian government continually enhances its AML regulations to ensure a comprehensive framework to tackle financial crimes. Companies and accounting professionals are urged to stay informed and adhere to the evolving regulations.

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Subheadings

  1. AML Regulations in India: Latest Developments
  2. Entities Covered Under India’s AML Regulations: An Overview
  3. Company Representatives and Accounting Professionals: New Reporting Entities
  4. Financial Activities Covered Under India’s AML Regulations for Accounting Professionals
  5. New Reporting Requirements: PML (Maintenance of Records) Amendment Rules
  6. Summary and Conclusion

Bullet Points

  • India’s AML framework, established under the PMLA 2002, continues to evolve to tackle financial crimes.
  • May 2023 amendments extended the PMLA to cover company representatives and accounting professionals.
  • Individuals and entities involved in the formation of companies and managing client finances fall under the AML regulations.
  • Accounting professionals must perform due diligence on clients and adhere to reporting obligations.
  • The new rules require beneficial owners’ information to be disclosed to the Fugitive Economic Offenders Authority.