Company Directors, Trustees Of Express Trusts Also Under PMLA Ambit

Last week practising chartered accountants, company secretaries, and cost & works accountants were also included in the PMLA ambit

<div class="paragraphs"><p>Image Credit: Unslpash</p></div>
Image Credit: Unslpash

After chartered accountants and company secretaries, individuals acting as directors or secretaries of a company or a partner of a firm, trustees of an express trust, and those who are nominee shareholders will now fall under the purview of the anti-money laundering law.

In a move that extends the ambit of the Prevention of Money Laundering Act 2002 and clamps down further on business professionals in the above-mentioned roles and those arranging for another person to act in those positions.

The new development comes on the heels of a notification last week, where practising chartered accountants, company secretaries, and cost and work accountants—carrying out financial transactions on behalf of their clients—were brought into the ambit of the PMLA law.

This notification, which came out late Tuesday, also included individuals acting as formation agents of companies and limited liability partnerships and even those who provide a registered office or administrative address for a company, limited liability partnership, or trust.

The move is likely to increase the compliance burden on such business professionals and comes as the government prepares itself for the Financial Action Task Force Review later in the year.

The FATF is an international intergovernmental body built on the back of G7 recommendations to develop policies to combat money laundering and was also expanded to include terrorism financing.

India has been vocal and supportive of measures to curb terror financing and is pushing for strong cryptocurrency regulation during its G20 presidency for the same.

Finance Ministry Tightens Definition Of Beneficial Owners Under PMLA

The development of PMLA ambit is not without exceptions. The following activities will be excluded:

  • Any activity that is carried out as part of any agreement of lease, sub-lease, tenancy, or any other agreement or arrangement for the use of land, buildings, or any space is subject to a deduction of income tax. 

  • Any activity that is carried out by an employee on behalf of his or her employer in the course of or in relation to his or her employment. 

  • Activity that is carried out by an advocate, a chartered accountant, a cost accountant, or a company secretary in practice who is engaged in the formation of a company to the extent of filing a declaration as required by the Companies Act, 2013. 

  • Activity of a person that falls within the meaning of an intermediary as defined in PMLA law

Money Laundering A Heinous Crime But PMLA Not A ‘Criminal’ Law In India?