FIU fines Paytm Bank ₹5.5 crore for PMLA violation

Paytm’s trouble escalated further with the Financial Intelligence Unit-India slapping a ₹5.49 crore penalty on Paytm Payments Bank Ltd (PPBL) for violating Prevention of Money Laundering Act (PMLA) obligations.

The penalty comes after Reserve Bank of India’s action against PPBL on 31 January where it directed the payments bank to stop accepting deposits or top-ups in any customer accounts, wallets, FASTTags and other instruments after 29 February citing large scale non-compliance of regulations and supervisory concerns. The deadline was later extended till 15 March.

The FIU-IND action against PPBL follows leads given by law enforcement agencies over movement of money by entities for illegal acts using the payments bank’s channel. The FIU found that the charges against Paytm were substantiated and hence imposed the penalty as per provisions of PMLA.

“FIU-IND initiated a review of the Paytm Payments Bank Ltd on receipt of specific information from law enforcement agencies in respect of few entities and their network of businesses engaged in a number of illegal acts, including organising and facilitating online gambling,” finance ministry said in statement.

“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 finance ministry said that with charges brought out by law enforcement agencies and after scrutiny of documents on record, a show cause notice was issue to PPBL.

After considering written and oral submissions of the Paytm Payments Bank Ltd, director FIU-IND, based on the voluminous material available on record, found that charges against Paytm were substantiated and thus vide order dated 1 March under PMLA, it was found to be appropriate to impose a penalty of ₹5.49 crore, the ministry said.

Reacting to the development, a 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 (FIU).”

Meanwhile, Paytm has begun cutting back business ties with its banking subsidiary, Paytm Payments Bank, with an aim to appease regulators who seek an arms’ length distance in the relationship between the two entities.

In a notification to the stock exchanges, the listed entity One97 Communication said that both the entities have agreed to simplify the shareholders agreement to support its governance. According to a person aware of the matter, the linkage bet-ween a regulated and unregulated entity was the main reason for RBI’s move on Paytm.