The Centre’ has done well to ramp up its scrutiny under the Prevention of Money Laundering Act of practising chartered accountants, company secretaries and cost accountants. Under this, their real-time reporting responsibilities on five main categories of specified activities, undertaken by them on behalf of their clients, have been spelt out. The five activities listed out in the latest PMLA notification are: buying and selling of any immovable property; managing of client money, securities or assets; management of bank, savings or securities accounts; managing the creation, operation or management of companies and LLPs; and buying and selling of entities. This could cover a wide gamut of transactions undertaken by these professionals.

There have been many provocations for this move. First and foremost is the requirement to align the country with the recommendations of the Financial Action Task Force (FATF), meant to combat money laundering and terrorist financing. The FATF is expected to review India’s performance later this year in introducing policies to combat this global scourge. However, the latest directive has left out lawyers, notaries and independent legal practitioners from reporting obligations under the five heads mentioned above, despite its being suggested by the FATF rules. There is every reason to believe that accountants and lawyers are equally complicit in devising various money laundering methods, such as creating a maze of shell companies and complex legal structures to obfuscate the money trail. However, the PMLA reporting obligation extends to casino operators, crypto players, real estate agents and dealers in precious metals. Second, the mushrooming of fly-by-night Chinese apps in the fintech space has been abetted and aided by accountants acting as a front for them and directly managing their monies.

India is taking the lead on reining in professional enablers vis-a-vis even the developed countries, leave alone nations such as Pakistan and Panama. It is to be hoped that stringent, almost- real-time reporting requirements will help uncover nefarious practices such as round-tripping through shell companies in obscure jurisdictions, the fallout of which could be tax evasion, market manipulation and in some cases cross-border terrorist financing.

The PMLA has been under the scanner for its powers of overreach, with the Supreme Court last year making certain observations against its use for relatively minor offences. This should be avoided, to ensure that India does not suffer a reputation hit on account of ease of doing business. That said, the penalty for non-reporting per se can attract a stringent fine, but not other criminal consequences. The spotlight on the accounting and legal fraternity brings into focus the role of their self-regulatory bodies. The Institute of Chartered Accountants of India has been less than transparent in its disciplinary actions in cases of professional misconduct. The onus will be on it aswell to mend its ways.