PayPal registers with FIU under anti-money laundering law; ends six-year long battle

American online payment gateway service provider PayPal has officially registered with India's Financial Intelligence Unit (FIU), marking the end of a six-year legal dispute.

The move aligns PayPal with the Prevention of Money Laundering Act (PMLA), under which it has completed the necessary formalities and submitted the required documents to the FIU.

The registration follows a protracted legal battle that began in March 2018, when the FIU first requested PayPal to register as a reporting entity to monitor and report suspicious transactions and cross-border wire transfers.

Compliance with anti-money laundering laws

In adherence to the anti-money laundering legislation, PayPal has appointed a principal officer to oversee official communications with the FIU.

The company said it is also in the process of appointing a director, fulfilling all stipulated requirements under the PMLA. The move comes in response to the Reserve Bank of India's (RBI) regulatory framework for cross-border payment aggregators.

Legal and regulatory challenges

PayPal faced a significant challenge in December 2020 when the FIU imposed a Rs 96 lakh penalty, accusing the company of frustrating the objectives of the PMLA by failing to register.

However, this penalty was overturned by the Delhi High Court in July 2023, which also recognized PayPal as a payments system operator under the PMLA, requiring it to comply with reporting obligations.

Despite appealing against this decision, The company informed the Delhi High Court in December that it was proceeding with registration under the RBI's guidelines.

What is the importance of registration?

The FIU emphasized the critical nature of PayPal's registration, highlighting the company's role in maintaining the integrity of India's financial system.

PayPal will share reports of suspicious transactions to enable the FIU to collaborate with law enforcement agencies which will enhance the country's ability to combat money laundering and financial crimes. 

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