The Financial Intelligence Unit-India (FIU-IND) has wielded its regulatory authority under the Prevention of Money Laundering Act ( PMLA ), 2002, imposing a significant penalty of Rs. 5,49,00,000 on Paytm Payments Bank Ltd.
This action comes in response to apparent breaches of its obligations under the PMLA, alongside the relevant Prevention of Money Laundering (Maintenance of Records) Rules, 2005, and associated directives issued by the Director FIU-IND.
The investigation into Paytm Payments Bank Ltd was initiated by FIU-IND following specific intelligence provided by law enforcement agencies. This information implicated certain entities and their network in unlawful activities, notably the facilitation of online gambling. It was revealed that proceeds from these illicit operations were being laundered through bank accounts held with Paytm Payments Bank Ltd.
Upon thorough examination of the evidence at hand, FIU-IND issued a compliance Show Cause Notice to the bank. This notice outlined multiple violations, including breaches of various provisions within the PML Rules, particularly Rules 7(3) and 2(1)(g), Rule 8(2), Rule 9(12), and Rule 9(14), concerning Anti-Money Laundering (AML), Counter Financing of Terrorism (CFT), and Know Your Customer (KYC) protocols, notably concerning payout services and beneficiary accounts.
Following a comprehensive review of both written submissions and oral arguments presented by Paytm Payments Bank Ltd, the Director of FIU-IND determined that the allegations against the bank were well-founded.
Consequently, on March 1st, 2024, exercising powers conferred under Section 13 of the PMLA, the Director deemed it appropriate to impose a hefty penalty amounting to Rs. 5,49,00,000.
The Reserve Bank of India (RBI) has officially announced the ban on Paytm Payments Bank, stating that the prohibition on accepting deposits was a measured supervisory action, commensurate with the seriousness of the situation.
In response to concerns that the Paytm issue might adversely impact the broader fintech industry, RBI Governor Shaktikanta Das assured that it was an isolated matter with a specific institution, dispelling worries about the entire system.
According to the necessary directions issued by the RBI, effective March 15, 2024, Paytm Payments Bank will cease accepting further credits into customer accounts and wallets, prompting regulatory intervention to mitigate potential disruptions in UPI operations.
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