ICAI Releases FAQs on PMLA Act, Designates CA Members as Reporting Entities

Key Takeaways:

1. Definition of Reporting Entity under PMLA Act.
2. General obligations of reporting entities under PMLA.
3. Specific reporting requirements, including maintenance of records for various transactions.
4. Client identity verification obligations and compliance with ICAI KYC Norms.
5. Preservation of records for a minimum period of five years.
6. Prohibition on disclosure of suspicious transaction reports.
7. Development of internal policies and procedures by CAs as reporting entities.
8. Communication and registration requirements with ICAI.
9. Reporting of suspicious transactions to FIU-IND within 7 working days.

Synopsis:

The Institute of Chartered Accountants of India (ICAI) has released Frequently Asked Questions (FAQs) on the Prevention of Money Laundering Act, 2002 through its Committee on Commercial Laws, Economic Advisory & NPO Cooperative. This initiative follows the government’s recent announcements designating CA members in practice as reporting entities under PMLA.

Key Details Unveiled by ICAI FAQs

1. Definition of Reporting Entity (RE): According to the PMLA Act 2002, a reporting entity is defined under section 2(wa) and includes entities such as banking companies, financial institutions, intermediaries, persons carrying on designated businesses or professions, and others as notified by the Central Government.

2. General Obligations of Reporting Entities under PMLA:

• Verify the identity of clients and beneficial owners.
• Maintain records for the prescribed period.
• Carry out enhanced due diligence.
• Report to the concerned authorities (FIU) as per prescribed procedures and manner.

3. Specific Reporting Requirements:

Maintain records of various transactions, including Cash Transaction Reports (CTR), Suspicious Transaction Reports (STR), certain transactions by NPO, cash transactions involving forged/counterfeit currency, cross-border and domestic wire transfers, and purchase/sale of immovable property above certain values.

4. Client Identity Verification Obligations:

As per the code of ethics of ICAI clause 320.3.A6, members are required to comply with ICAI KYC Norms.

KYC Norms have been made mandatory for verifying the identity of assurance clients and clients engaged in specified activities.

5. Preservation of Records:

Under section 12 of the PMLA, records of transactions and related documents are required to be preserved for a minimum period of five years from the date of completion of the transaction or the end of the business relationship.

6. Prohibition on Disclosure:

CAs as RE and their employees are prohibited from disclosing or “tipping off” that an STR or any related information has been furnished to FIU-IND.

7. Internal Policies and Procedures: CAs as REs shall develop internal policies and procedures related to customer identification, acceptance, risk profile, transaction monitoring, red flags indicators, reporting mechanism to FIU-IND, and maintenance of records.

8. Communication and Registration with ICAI:

CAs as REs shall communicate and register with ICAI in the prescribed manner, including information related to Principal Officers and/or Designated Directors.

9. Reporting of Suspicious Transactions:

Suspicious transactions should be reported to FIU-IND within 7 working days from the date of forming suspicion on such transactions, as per the rules provided under the Prevention of Money Laundering Rules (PMLR).