The Financial Intelligence Unit-India (FIU-IND) has imposed a penalty of ₹5.49 crore on Paytm Payments Bank Ltd (PPBL) for violating its obligations under the Prevention of Money Laundering Act (PMLA), the Ministry of Finance said in a release. This is the latest setback for the digital payments giant, which is also facing regulatory scrutiny from the Reserve Bank of India (RBI) over its compliance issues.
FIU-IND’s review and penalty
According to the release, the FIU-IND initiated a review of PPBL after receiving specific information from law enforcement agencies about some entities and their network of businesses engaged in illegal activities, including online gambling, using accounts held at PPBL. The bank was issued a show cause notice citing breaches of various PML Rules, including those related to anti-money laundering (AML), counter-terrorist financing (CFT), and know your customer (KYC) safeguards.
The FIU-IND found PPBL guilty of violations under multiple rules, such as failure to comply with AML/CFT/KYC safeguards concerning payout services and beneficiary accounts. Despite PPBL’s submissions, the Director, FIU-IND, based on comprehensive material, substantiated the charges and imposed a hefty penalty of ₹5.49 crore through an order dated March 1st, 2024 .
RBI’s action and implications
This action comes at a time when PPBL is also facing action from the RBI, which has told it to halt deposits, credit transactions and top-ups in customer accounts, prepaid instruments and wallets by March 15th. The RBI has also asked the National Payment Council of India (NPCI) to examine the request of One97 Communications (which owns Paytm) to become a Third-Party Application Provider (TPAP) for continued Unified Payments Interface operation of the Paytm application.
The FIU-IND’s penalty on PPBL serves as a stern reminder of the regulatory commitment to combat money laundering and illicit financial activities. This incident also underscores the importance of financial institutions adhering to stringent AML/CFT/KYC measures, with non-compliance incurring severe penalties. The repercussions of this penalty on PPBL are not only financial but also impact its reputation in the broader financial landscape.
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