Govt. plan to make professionals accountable for info sharing under PMLA

Increasing instances of the role of chartered accountants, tax consultants and lawyers in financial frauds, particularly during the demonetisation exercise, has led the Central government to contemplate changes in existing laws, making it mandatory for them to report suspicious transactions under the Prevention of Money Laundering Act (PMLA) regime.

If the required amendments are introduced, they could be in the form of an exception to the general rule of client confidentiality that intermediary professionals like chartered accountants and lawyers currently enjoy. Existing rules extend to them immunity from disclosing client information to anyone.

Section 14 of the PMLA also gives immunity to the reporting entities against civil and criminal proceedings for furnishing information as sought by the competent authority. While Section 12 of the Act puts an obligation on banks, financial institutions and intermediaries to maintain records for 10 years, Section 13 empowers the Financial Intelligence Unit’s (FIU) chief to call for such records. The FIU findings do not have evidentiary value and has to be established by enforcement agencies.

Section 54 provides that officers and members of the Institute of Chartered Accountants of India are required and empowered to assist in the enforcement of the Act.

Currently, the communication between chartered accountants, lawyers and their clients are deemed privileged and so, they are legally not bound to proactively share details of any suspicious transactions. That is why, the Reserve Bank of India rules prohibit them from holding any account on behalf of their clients, as they cannot divulge the particulars.

However, in view of the recent money laundering cases through shell companies -- in which the professionals have been found actively involved -- the government has started exploring all legal possibilities to check such a malpractice and prosecute the guilty.

In February, while setting up a joint task force on action against shell companies, which are used to launder unaccounted money, the government disclosed that 54 professionals -- which include chartered accountants and tax consultants -- had been found complicit.

After the demonetisation announcement, various agencies conducted searches and detected the involvement of professionals in illegal conversion of the trashed notes in huge amounts. The most prominent is the case of Delhi-based lawyer Rohit Tandon, who has been accused by the Directorate of illegally converting Rs.51 crore in demonetised cash, for which he got back Rs.38 crore.

The agency alleges that the lawyer got the cash converted in connivance with a bank manager, his chartered accountant and accommodation entry operators. Another accountant was arrested by the ED in the Rs.40-crore Axis Bank case in the national capital.

In the recent drive against shell companies, the Directorate had also searched the premises of a chartered accountant on Barakhamba Road in Delhi’s Connaught Place. He is accused of having formed over 200 shell companies and given accommodation entries to a large number of people, including sand mafias, from Uttar Pradesh.

Not long ago, the Central Bureau of Investigation had registered a corruption case against four senior officials of Syndicate Bank’s Jaipur and Udaipur branches, a chartered accountant and others for alleged fraud of Rs.1,000 crore involving more than 100 accounts. The overall financial transaction in the entire scam amounted to about Rs.18,000 crore.

Also, in the case of Uttar Pradesh-based chief engineer Yadav Singh who faces serious corruption charges, agencies suspect the role of a chartered accountant in the laundering of funds.#casansaar (The Hindu)