CAs could be punished for helping clients in money laundering


The government has moved to punish chartered accountants if they help clients hide ill-gotten wealth through opaque bank transactions, or money laundering, two top officials said on Tuesday.

The proposal to tweak the Prevention of Money Laundering Act (PMLA) came from the revenue department on the instruction of the Prime Minister’s Office (PMO), one of the officials from the finance ministry said. The second source is from the PMO. Both officials refused to be identified because of the sensitivity of the matter.

The PMLA stipulates up to seven years in jail and the confiscation of property of those involved in money laundering but that doesn’t include chartered accountants. The proposed amendment doesn’t make it clear what the punishment would be for CAs.

“The preliminary view is that an amount or asset equal to the laundered amount should be confiscated from the chartered accountants as well,” the second official told Hindustan Times.

Income tax and corporate laws allow the prosecution of CAs for wilful wrongdoing. Including them in the anti-money laundering act closes a loop in Prime Minister Narendra Modi’s high-octane campaign against corruption that saw his government ban old 500 and 1000-rupee banknotes.

Since then, government agencies, including the Enforcement Directorate and the Central Bureau of Investigation, have cracked down on suspect deals.

The finance ministry official told HT that investigators had come across alleged instances where CAs wilfully helped companies launder or roundtrip money.

“The government realises that if a stringent law is brought against the key player in money laundering we will be able to curb black money generation,” the official said, referring to instances of CAs helping hide ill-gotten wealth.

The Institute of Chartered Accountants of India (ICAI), the apex body regulating the profession in the country, was guarded in its reaction.

“A specific provision holding chartered accountants responsible in case of money laundering is not a bad move. Every person involved in any kind of wrong doing should bear responsibility and it should not be restricted just to CAs,” said Dhinal Shah, member central council of ICAI.

Manoj Fadnis, former ICAI president, said chartered accountants shouldn’t be held guilty if they follow globally accepted accounting norms but end up making an honest mistake because the facts and figures provided to them were wrong.