SUMMARY
FIU-IND initiated a review of Paytm Payments Bank after receiving information from law enforcement agencies about a few entities engaged in a number of illegal acts
The finance ministry said that the charges against the payments bank were substantiated based on the voluminous material available on record and the bank’s submissions
This adds to the troubles of the bank, which is an associate of Paytm, as the RBI has already ordered multiple curbs on its activities
The Financial Intelligence Unit-India (FIU-IND) has imposed a monetary penalty of INR 5.49 Cr on Paytm Payments Bank Ltd for violations of its obligations under the Prevention of Money Laundering Act (PMLA).
The finance ministry, in a statement on Friday (March 1), said that FIU-IND imposed the penalty on Paytm Payments Bank Ltd under Section 13(2)(d) of the PMLA, 2002.
FIU-IND initiated a review of Paytm Payments Bank after receiving “specific information” from law enforcement agencies in respect of a few entities and their network of businesses engaged in a number of illegal acts, including organising and facilitating online gambling, the statement said.
“Further, the money generated from these illegal operations, i.e. proceeds of crime were routed and channelled through bank accounts maintained by these entities with the Paytm Payments Bank Ltd,” the statement added.
The ministry also noted that the charges against Paytm were substantiated based on the voluminous material available on record and after considering the written and oral submissions of the Paytm Payments Bank.
FIU-IND is the central national agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions. It reports to the Economic Intelligence Council (EIC) headed by the union finance minister.
Commenting on the development, a Paytm Payments Bank spokesperson said, “The penalty pertains to issues within a business segment that was discontinued two years ago. Following that period, we have enhanced our monitoring systems and reporting mechanisms to the Financial Intelligence Unit.”
The development adds to the ongoing troubles at Paytm Payments Bank, which, since January 31, has been facing a regulatory crisis after the Reserve Bank of India (RBI) imposed certain restrictions on the company. The restrictions include the payments bank stopping its usual operations and banking services by March 15.
Given the payments bank is an associate of listed fintech major Paytm, the RBI’s crackdown on the former has also taken a significant toll on Paytm’s market performance with experts cautioning about serious direct and indirect impact on its business.
As per the finance ministry’s statement today, FIU-IND issued a compliance show cause notice to Paytm Payments Bank for its violations of different PML rules, also in terms of AML / CFT / KYC safeguards in respect of payout services and in respect of beneficiary accounts.
It is pertinent to note that the know your customer (KYC)/anti-money laundering (AML)/combating of financing of terrorism (CFT) guidelines are meant to prevent banks from being used, intentionally or unintentionally, by “criminal elements for money laundering or terrorist financing activities”.
Amid the ongoing troubles at Paytm Payments Bank, shares of Paytm have declined sharply and are currently trading 44% lower since the RBI crackdown happened.
