Paytm Payments Bank fined Rs 5.49 crore for money laundering violations

Bengaluru: The Financial Intelligence Unit (FIU) on Friday pinned the already embattled Paytm Payments Bank Ltd (PPBL) under the Prevention of Money Laundering Act (PMLA). The financial regulator has fined PBBL with a charge of Rs 5.49 crore, on the grounds that the Paytm subsidiary’s users engaged in a number of illegal activities, including organising and facilitating online gambling, it said in a press statement.

“FIU-IND initiated a review of the Paytm Payments Bank Ltd on receipt of specific information from law enforcement agencies in respect of a few entities and their network of businesses engaged in a number of illegal acts,” it noted.

The watchdog further alleged that the proceeds of these crimes were routed and channelled through PPBL bank accounts that these entities held.

The Reserve Bank of India (RBI) in October last year had imposed a penalty of Rs 5.39 crore on PPBL citing non-compliance with RBI’s know your customer (KYC) directives, noting that it failed to identify beneficiaries of the entities that it onboarded for its payout services. It was also accused of not monitoring payout transactions or carrying out risk profiling of these entities.

In its Friday directive, FIU also accused Paytm of not following anti-money laundering (AML) and KYC requirements in respect to payout services and beneficiary accounts.

Last month, the enforcement directorate (ED) in its investigation had found that PPBL was not in violation of Foreign Exchange Management Act (FEMA) while investigating its transactions. This came after the RBI asked the payments bank to halt operations post February 29, which was later extended to March 15, on account of persistent non-compliance.

In a bid to soothe regulators by distancing itself from the defamed firm, the parent firm - Paytm, on Friday announced that it had severed inter-company ties with PPBL to reduce dependencies.

“Further, the shareholders of PPBL have agreed to simplify the Shareholders Agreement (SHA) to support PPBL’s governance, independent of its shareholders,” the company informed in an exchange filing.

Paytm has been trying to court partnership from regulated banking entities to continue its transaction business. Last month, it shifted its nodal account from PPBL to Axis Bank to continue operating other businesses, and is reportedly in talks with other banks to open similar accounts. It is also in the process of receiving a third party application provider (TPAP) licence in partnership with multiple banks.

The company’s stock gained 5% in intra-day trading on Friday on account of the announcement. However, the impact of FIU’s late evening directive is yet to be seen.