Chartered Accountants, Company Secretaries and Cost Accountants as PMLA Reporting Entities

The Central Government notification of 3 May 2023 brought specified financial activities carried out on behalf of clients by practising chartered accountants, company secretaries and cost accountants within the PMLA reporting-entity framework. The notification is activity-based; it does not convert every audit, certification, appearance or professional consultation into a reportable service.

Covered client activities

The notified activities include buying and selling immovable property; managing client money, securities or other assets; managing bank, savings or securities accounts; organising contributions for creation, operation or management of companies; and creating, operating or managing companies, limited liability partnerships or trusts, and buying or selling business entities.

The professional must examine whether the engagement involves carrying out a notified transaction on behalf of the client. Advice about a transaction and actual execution or management may occupy different legal positions. Engagement letters should define scope accurately.

Core obligations

Where covered, the professional must complete FIU-IND registration as required, appoint compliance functionaries, conduct client and beneficial-owner due diligence, assess risk, monitor the relationship, maintain reconstructable records and submit prescribed reports including suspicious transaction reports.

Professional secrecy and tipping off

Client confidentiality remains important, but it is subject to statutory reporting duties. At the same time, not every confidential communication loses legal professional protection. The nature of the service, applicable evidence law and statutory exceptions require careful analysis. A professional must not tell the client that an STR is contemplated or filed.

Suspicion is not accusation

An STR decision should be based on documented red flags: unexplained ownership layers, transactions without commercial rationale, unusual cash, inconsistent source of funds, sham directors, rapid asset transfers or resistance to beneficial-ownership disclosure. Filing is intelligence reporting, not a public finding of guilt.

Risk management

Firms should segregate covered and non-covered engagements, maintain conflicts and acceptance controls, train teams, define escalation to the Principal Officer and preserve an audit trail. Withdrawal from an engagement does not automatically remove a reporting obligation and should be handled without tipping off.

The 2023 regime makes professionals gatekeepers only for defined transactional activities. Precision about scope protects both AML objectives and legitimate professional practice.

Sources

Ministry of Finance notification S.O. 2036(E), 3 May 2023.

FIU-IND, AML/CFT Guidelines for Professionals with Certificates of Practice from ICAI, ICSI and ICMAI: https://fiuindia.gov.in/files/Downloads/Downloads.html

Prevention of Money-laundering (Maintenance of Records) Rules, 2005: https://fiuindia.gov.in/files/AML_Legislation/notification.html

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