Clipped from: https://www.thehindubusinessline.com/opinion/why-cas-have-been-brought-under-pmlas-ambit/article66824372.ece
The trigger may have been the role of CAs in Chinese loan apps. But lawyers too must be subject to similar scrutiny
On May 3, the Finance Ministry made an amendment to Section 2(sa) of the Prevention of Money Laundering Act (PMLA) by using their powers given on Section 2(vi) of the same Act. Through this amendment, Chartered Accountants, Company Secretaries and Cost Accountants were included in the list of “persons carrying on designated business or profession”.
They join persons carrying on activities for playing games of chance for cash or kind including casinos, real estate agents, dealers in precious metals or precious stones and persons engaged in safekeeping of cash and liquid securities who were already a part of Section 2(sa) of the PMLA.
The five broad categories of financial transactions listed in the notification include buying and selling of 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 and creation, operation or management of companies, limited liability partnerships or trusts, and buying and selling of business entities. This casts a duty on professionals to maintain complete details including KYC norms of clients entering into any of the above transactions.
It is apparent that the amendment to the PMLA has been done as a reaction to the Chinese apps scam. Some professionals were actively involved in assisting to set up shell companies to act as a foil for the apps.
They not only assisted in setting up these companies using their office address as the registered office of the company but they also became directors in these companies.In a few instances, they also got powers to operate the bank accounts of these companies. Some of these apps offered instant loans which was too tempting to resist for many.
However, the personal data of the recipients of the loan was compromised in many cases and was shared with many other apps including gaming apps. From 2020, the government banned more than 220 Chinese apps.
Since the only traceable link to these companies were the professionals, the government arrested some of them and referred their names to the Institute of Chartered Accountants of India for taking the necessary disciplinary action.
A notable omission to the amendment to the PMLA are lawyers and legal consultants. If the government wants to close every aspect to prevent money laundering, they should cover lawyers and legal professionals too under PMLA. Those who indulge in money laundering would take the assistance of legal professionals..
Encompassing professionals under PMLA could also be a pre-cursor to India becoming a part of the Financial Action Task Force (FATF). PMLA has always been considered to be a draconian law which spares none.
However, professionals should take comfort in the fact that PMLA states that both the Adjudicating Authority and the Appellate Tribunal shall not be bound by the Code of Criminal Procedure, 1908 but by the principles of natural justice.
The writer is a chartered accountant