Paytm Payments Bank has been imposed with a fine of Rs 5.49 crore by the Financial Intelligence Unit (FIU) for its failure to establish an internal mechanism to detect and report suspicious transactions, as mandated by the anti-money laundering law. The FIU stated that the penalty is related to issues within a business segment that Paytm Payments Bank discontinued two years ago. The bank has claimed that it has strengthened its monitoring systems and reporting mechanisms to comply with the requirements of the FIU.
The FIU’s order, accessed by PTI, revealed that the investigation against Paytm Payments Bank began in 2020 after law enforcement agencies raised concerns about extensive illegal activities conducted by multiple businesses associated with a foreign state. FIRs were subsequently filed by the Cyber Crimes unit of the Hyderabad Police against these entities under various sections of the IPC and the Telangana State Gambling Act.
The FIU stated that the fraudulent activities, including online gambling, dating services, and streaming services, were conducted by these entities and the proceeds were routed through bank accounts maintained with Paytm Payments Bank. The involved entities allegedly cheated lakhs of Indians through these illegal services. Some of the funds obtained from the fraudulent activities were remitted abroad, indicating their involvement in money laundering.
The order further highlighted that Paytm Payments Bank failed to discharge its obligations under Chapter IV of the Prevention of Money Laundering Act (PMLA). The bank was charged for its failure to detect and report suspicious transactions in accordance with the PMLA and PML Rules. It was also accused of failing to exercise ongoing due diligence in relation to its payout service and accounts of the entities involved. Additionally, the bank was charged with non-compliance with the requirements for reliance on third-party KYC and failure to file suspicious transaction reports within the prescribed timelines.
As a result of these violations, Paytm Payments Bank received a fine of Rs 5.49 crore under Section 13 of the PMLA. This section allows for the imposition of monetary penalties on reporting entities that fail to comply with their obligations under the Act. Reporting entities are required to maintain records of transactions, submit reports to the FIU, and keep documentation related to client identities and account files.
Following the penalty, Paytm Payments Bank faced further challenges. The Reserve Bank of India directed the bank to stop accepting fresh deposits from customers starting from February 29. Vijay Shekhar Sharma stepped down as part-time non-executive Chairman of the bank, and the bank’s board was reconstituted. Paytm Payments Bank has been working to address these issues and strengthen its compliance measures to avoid further penalties and regulatory action.
