What is PMLA Act?
The Prevention of Money-Laundering Act (PMLA) 2002 is an Act to prevent money laundering and provide for confiscation of property derived from, or involved in, money laundering. Illegally obtained funds are laundered and moved around the globe using shell companies and intermediaries, giving them legitimacy, and impacting the nation’s exchequer and growth, thus, the said enactment was enacted to curb such practices.
What are necessary amendments that have been brought to tackle the issue at hand?
In an attempt to curb black money, the Indian government has extended the reach of the PMLA to include individuals helping in company formation, such as directors, secretaries, and proxy nominee directors, as well as those providing registered offices, business addresses, accommodations, correspondence, or administrative addresses for companies, LLP(s) or trusts. Earlier on May 3, 2023, Government had also expanded the scope to include practicing Chartered accountants (CA), company secretaries (CS), and cost and works accountants (CWA) who conduct financial transactions on behalf of their clients. The scope of the law has been expanded to encompass anyone who represents another person in certain activities.
Who all are included under PMLA Act as of May 2023?
As of May, 2023, the following entities are subject to AML Compliance in India: Individuals, Beneficial owners, Companies and all individuals helping in the formation of a company, including those acting as a director, secretary or proxy nominee director, Trusts, Non face-to-face customers, Partnership firms, Foreign portfolio investors, NGOs, Politically exposed persons outside India, Banking intermediaries and financial companies, Intermediaries in the crypto ecosystem, such as crypto exchanges, wallets, service providers and Accounting professionals including CA, CS, CWA
Why was it necessary to bring the recent amendments?
The recent amendments and inclusions under the PMLA, 2022 are in response to the Chinese apps scam, which was used as medium to lure individuals and dupe them. During this scam it came to light that the accounting professionals helped set up shell companies with access to bank accounts and offered instant loans, leading to the laundering of monies. However, since a certain class of persons were not mentioned in the class of persons who could be classified under the scope of ambit of PMLA, it was seen necessary to include such persons for effective implementation of the statute. The recent amendments also include other concepts like a politically exposed person, beneficial ownership amongst others. However, the inclusion of entities dealing in cryptocurrency and virtual digital assets as reporting entities under the PMLA, 2022 is a big welcoming step to curb laundering using virtual databases.
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