Government Brings Finance Professionals Of Clients Under Anti-Money Laundering Law

The Ministry of Finance on Wednesday notified changes to the Prevention of Money Laundering Act, tightening the rigour for finance professionals who carry out transactions for clients and ushering in a more stringent compliance process.

The change brings 'a relevant person'—practising chartered accountants, company secretaries, and cost and works accountants—carrying out financial transactions on behalf of their client, into the ambit of the anti-money laundering law.

In a notification, the ministry clarified the extent of financial transactions carried at the behest of the client that will be considered.

This includes:

• Buying and selling of any immovable property.

• Managing of client money, securities or other assets.

• Management of bank, savings or securities accounts.

• Organisation of contributions for the creation, operation or management of companies.

• Creation, operation or management of companies, limited liability partnerships or trusts, and buying and selling of business entities.

According to Amit Maheshwari, tax partner at AKM Global, the move would add to the compliance burden of these professionals.

These people are already regulated by professional bodies set up under various acts of Parliament, Maheshwari said. He termed such measures "uncalled for".

"The ultimate effect of the recent notification is to ensure that such reporting entities shall maintain the record of all transactions and shall furnish the same to the director (of the Financial Intelligence Unit), who exercises the powers under Chapter IV of the act," Maheshwari said.

This requires the reporting entities to now conduct KYC before the commencement of each specified transaction, take steps to examine the ownership and financial position—including sources of funds of the client—and to record the purpose behind conducting the specified transaction, he said.

Failure to meet the requirements would entail an imposition of penalty by the FIU director under Section 13, and open the reporting entity to be arraigned by the Enforcement Directorate—as an accused for knowingly assisting the main accused in the commission of the money laundering, Maheshwari said.