March 2023

The Risks Posed to Chartered Accountants by the Prevention of Money Laundering Act, 2002

Aditya Ajgaonkar, Advocate


The role of Chartered Accountants has increased exponentially in the modern-day business environment. Gone are the days when the question of whether a Chartered Accountant conducting an audit was expected to be a watchdog or a bloodhound. The enlarged scope of audit/ compliance and the multifaceted advisory services rendered in today’s complex business environment by Chartered Accountants have opened them up to numerous regulatory and compliance-related challenges. We can see that Chartered Accountants are being called in for questioning by investigating agencies when a client’s affairs are the subject matter of investigation. Much unlike a Lawyer, the communication between a client and a Chartered Accountant does not get covered within the ambit of ‘legal privilege/privileged communication’ even though modern-day Chartered Accountants render a raft of quasi-legal services. With mushrooming of various tribunals before which Chartered Accountants has the right to represent, the risks they are exposed to in dispensing quasi-legal services need to be looked into given the numerous statutory laws that can cause an individual or professional firm to land in hot waters.

The last decade has witnessed sea changes in the regulation of economic activities. A number of legislations have now granted mandates to specialized agencies to detect and prevent economic offences. Much water may have flown under the bridge since the judgment of the Supreme Court in the State of Gujarat v. Mohanlal Jitmalji Porwal (1987) 2 SCC 364 wherein economic offences were compared with even a crime as unforgivable as murder. However, the judiciary still considers economic offences very seriously. It has now been established without a doubt that economic offences are to be regarded as a class unto themselves. The Serious Fraud Investigations Office, the Directorate of Enforcement, and the Income Tax authorities as mandated by the Prohibition of Benami Transaction Law in addition to other investigating agencies including the local police all operate in the field of investigating economic offences. Economic offences do not exist in silos. There is always the possibility of an overlap or an interplay. Investigation of economic offences invariably involves, inter alia, following the trail of money. Consulting and accounting professionals thus suddenly may find themselves in the epicenter of these investigations. No matter what the final verdict is, the taint of being accused of an economic offence often leaves an indelible mark on a person.

While studying for Master’s degree in law, a curious question was posed by a professor: “What can be done about bad advice?” This question was raised over a decade ago, and much water has flown under the bridge s


Keywords Search
HTML View Search
Current Issue