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Works Accountants Now Under PMLA Scrutiny

New Delhi: The Indian government has brought works accountants under the purview of the Prevention of Money Laundering Act (PMLA) as a reporting entity, effective immediately. This move aims to curb money laundering and terrorist financing activities in the country.

Background

According to sources, the Institute of Chartered Accountants of India (ICAI) will cooperate with the government and raise awareness among its members about their obligations under the PMLA. While no specific rules have been notified yet, works accountants who execute certain financial transactions on behalf of clients will now be required to comply with anti-money laundering (AML) requirements.

ICAI Cooperation

The ICAI has stated that it will work closely with the government to ensure that its members understand and adhere to their AML obligations. The move is expected to strengthen India’s efforts in combating money laundering and terrorist financing.

AML Compliance for Non-Regulated Sector

While there are no specific legal obligations for the non-regulated sector to have AML measures, it is advisable to implement such measures to mitigate AML risks. This includes:

  • Implementing customer due diligence
  • Monitoring transactions
  • Reporting suspicious activities

Regulatory Responsibility

In India, specialized regulators such as:

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

are responsible for enforcing AML requirements. The Central Government may also empower state government officers to assist in PMLA enforcement.

Government Agencies Responsible for Enforcement

The Enforcement Directorate (ED) is the specialized investigative agency tasked with enforcement and prosecution under the PMLA. The Financial Intelligence Unit (FIU), established in 2004, is responsible for:

  • Receiving suspect financial transactions
  • Processing and analyzing information related to suspect financial transactions
  • Disseminating information related to suspect financial transactions

Penalties for Non-Compliance

The FIU can impose monetary penalties of up to INR 100,000 on reporting entities that fail to comply with AML requirements. Non-compliance with customer identification, due diligence, and transaction reporting requirements under the PMLA is subject to penalty provisions.

Other Types of Sanctions

Besides monetary fines and penalties, the PMLA also imposes other sanctions, including:

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