Sharma’s Paytm Payments Bank fined Rs 5.49 crore by FIU-IND for money laundering

The Financial Intelligence Unit-India (FIU-IND) has imposed a hefty fine of Rs 5.49 crore on RBI-hit Paytm Payments Bank Ltd (PPBL) for failing to comply with the Prevention of Money Laundering Act (PMLA) obligations. 

Decision influenced by law enforcement agencies

The FIU-IND's decision was influenced by information from law enforcement agencies concerning the movement of funds related to illegal activities through PPBL's channels. Specifically, entities were found to be engaging in and facilitating online gambling, with the proceeds of these crimes being funnelled through accounts held at PPBL.

The finance ministry highlighted that the review of PPBL was initiated following the receipt of specific information regarding these entities and their illicit operations.

"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. 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 ministry said.

Detailed findings and penalties

Upon reviewing the case, the FIU-IND issued a compliance Show Cause Notice to PPBL, outlining violations across multiple rules under the PMLA and its associated guidelines, including failures in maintaining proper records and implementing adequate anti-money laundering (AML) and counter-terrorist financing (CTF) safeguards.

After considering PPBL's written and oral submissions, the FIU-IND concluded that the charges were substantiated, leading to the imposition of the Rs 5.49 crore penalty on March 1, 2024, as per the press statement.

What did Paytm say about the fine?

In response to the penalty, Paytm, in an exchange filing, said, “The penalty pertains to issues within a business segment that was discontinued two years ago. Following that period, the bank has enhanced its monitoring systems and reporting mechanisms to the Financial Intelligence Unit (FIU).”

RBI's action on Paytm Payments Bank

The action follows closely on the heels of the Reserve Bank of India's (RBI) directive issued on January 31, which ordered PPBL to halt the acceptance of new deposits and top-ups across customer accounts, wallets, FASTags, and other instruments by February 29, a deadline that was subsequently extended to March 15.

The fine and preceding RBI directive represents significant regulatory challenges for PPBL, affecting its ability to accept new deposits and conduct transactions. Despite these setbacks, Paytm has assured that its QR codes, soundbox, and card machines will continue to operate as usual.