Bansri Shah, Pune
The banking arm of Paytm, Paytm Payments Bank Ltd (PPBL), was fined Rs. 5.49 crore by the Financial Intelligence Unit (FIU) of India for money laundering, said the Finance Ministry of India on Friday. This penalty comes after Reserve Bank of India’s order to Paytm Payments Bank in February to cease operations by March 15 following persistent problems in compliance and regulatory oversight concerns.
According to a statement issued by the Finance Ministry of India, the penalty was imposed in accordance with the powers vested in the Director FIU-IND under Section 13(2)(d) of the Prevention of Money Laundering Act (PMLA), 2002. This penalty is related to violations of obligations under the PMLA, as well as the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules), and relevant guidelines and advisories issued by the Director FIU-IND.
The actions undertaken by FIU-IND against PPBL followed law enforcement provided leads regarding the movement of money through the payments bank’s channels for illegal activities, including organizing and facilitating online gambling. The FIU’s order said that the payments bank had neglected to report the suspicious transactions and conduct proper due diligence on these accounts. The allegations against Paytm were then verified by the FIU based on the large amounts of material against the bank available on record and the fines imposed on PPBL were in accordance with the regulations of violating PMLA. FIU, on Friday, also accused Paytm of not adhering to anti-money laundering (AML) and Know Your Customer (KYC) requirements concerning payout services and beneficiary accounts.
A Paytm spokesperson responded to the statement by the Ministry stating that the penalty was related to matters concerning a business segment that had been discontinued two years earlier. They said that since that time, Paytm had improved its monitoring systems and reporting mechanisms to comply with regulations, including enhancements to its reporting to the FIU.
Paytm had also received notices for providing information from other authorities including the Enforcement Directorate. ED found in its investigation that PPBL was not violating the Foreign Exchange Management Act (FEMA).
In the meanwhile, Paytm has cut ties with the payments bank to reduce dependency and appease authorities who want distance between the two entities.