Trust and Company Service Providers need to register with FIU-IND

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CA Mayur Joshi
CA Mayur Joshi
CA Mayur Joshi is a Forensic Accounting evangelist in India. He is the co-founder of Indiaforensic and is author of 7 books on forensic accounting, fraud investigations and money laundering.

Soon after getting the professionals under the purview of PMLA, FIU introduced the norms for Trust and Company Service Providers. So finally, much-needed clarity has come from the AML regulator/nodal agency FIU IND themselves.

As per the earlier notification dated 9th May 2023 wherein certain activities were brought under the purview of PMLA framework when carried out in the course of business on behalf of or for another person was stated.

Exempted Trusts and Company Service Providers Activities

The following activities SHALL NOT be regarded as activities for the purpose of attracting provisions of PMLA as under;

  • Any activity that is carried out as a part of any agreement of lease, sub-lease, tenancy or any other agreement for the use of land or building or any other space and the consideration is subject to TDS under Section 194-I of the Income Tax Act, 1961
  • Any activity that is carried out by an employee on behalf of his employer in the course of or in relation to his employment
  • Any activity that is carried out by an advocate, a chartered accountant/cost accountant/ company secretary in practice; who is engaged in the formation of a company to the extent of filing a declaration as required under the Companies Act, 2013.
  • Any activity of a person which falls within the meaning of an “Intermediary” as defined under PMLA

Therefore, the following financial transactions carried out by a practicing professional on behalf of his client, in the course of his or her profession, in relation to the following activities

(i) buying and selling of any immovable property;

(ii) managing client money, securities, or other assets;

(iii) management of bank, savings, or securities accounts;

(iv) organization of contributions for the creation, operation, or management of companies;

(v) creation, operation, or management of companies, limited liability partnerships or trusts, and buying and selling of business entities will be treated as “Trust & Company Service Providers” (TCSPs), a reporting entity under provisions of PMLA.

Action Points for TCSPs

Accordingly, as reporting entity, they will be required to;

  • Register themselves as RE on the FINNET 2.0 portal immediately.
  • Appoint a Principal Officer, Designated Director and ensure a framework for client due diligence is put in place.
  • Formulate and adopt risk management practices
  • Retain records of transactions carried out in the purview of activities conducted under PMLA
  • Training their staff on these matters
  • Implementation of internal mechanisms to detect and report suspicious transactions.

How do Trusts and Company Service Providers Comply?

Much clarity has been provided by FIU IND now. The first and foremost step would be to ensure that;

  • Have a re-look at whether as a practicing professional, you are providing any such services/ conducting activities as defined in PMLA
  • Immediately ensure records of such clients on whose behalf activities are conducted are kept in safe custody (both in soft copy and hard copy formats)
  • Register themselves on FINNET 2.0.
  • Perform re-due diligence, if warranted to corroborate that the transactions conducted appear to be bonafide and have a clear economic rationale.
  • If anything appears suspicious, ensure STR filing of the same.
  • Train, re-train, and build capacity for ensuring all the staff realize the gravity of these new compliances under PMLA
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