India's FIU fines Paytm Payments Bank

Monday 4 March 2024 13:30 CET | News

The Financial Intelligence Unit (FIU) from India has announced that it imposed a monetary penalty of approximately USD 662,565 on Paytm Payments Bank

As per the information detailed by the Indian authority, the FIU imposed fines on Paytm’s banking arm, Paytm Payment Bank, concerning the violations in reporting illegal money routed through its accounts. The fine was charged for alleged violations of Anti-Money Laundering (AML) regulations under the Prevention of Money Laundering Act (PMLA).

The Financial Intelligence Unit (FIU) from India has announced that it imposed a monetary penalty of approximately USD 662,565 on Paytm Payments Bank.

Paytm Payments Bank’s penalty basis

As mentioned by FIU, the authority initiated a review of the Paytm Payments Bank after receiving specific information from law enforcement agencies regarding a few entities and their network of businesses being engaged in several illegal acts, including organising and facilitating online gambling and routing proceeds through the bank. The FIU underlined that the funds generated from these illegal activities were forwarded and channelled through bank accounts maintained by these entities with the Paytm Payments Bank.

The decision to fine the banking arm was made after considering the written and oral submissions and the material available on record, with the authority finding that the charges against Paytm were substantiated. Additionally, the penalty relates to misconduct within a business segment that was discontinued in 2022, with the branch since improving its monitoring systems and reporting mechanisms to the FIU. Prior to this announcement, the Reserve Bank of India (RBI) directed the branch to cease operations by the middle of March 2024 due to persistent compliance issues and supervisory concerns. This caused disruption for the payment app, which relied on the banking unit’s infrastructure. Moreover, shares in Paytm experienced a considerable decline following the regulatory directive despite reassurances from the company’s officials that the digital payments app would proceed to operate normally.

Furthermore, the RBI took action against Paytm Payments Bank as the latter did not comply with regulations and supervisory concerns, which persisted over several years, as per the information provided by Reuters. At that time, the RBI’s directive was part of ongoing efforts to bring Paytm to compliance, with the authority previously fining Paytm Payments Bank USD 650,000 for non-compliance, including violations of Know Your Customer (KYC) rules. Also, in 2022, the bank was restricted from acquiring additional customers and an audit of its IT systems was ordered, due to Paytm’s stock market listing and concerns about its valuation and business model.

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Keywords: regulation, AML, money laundering, banking, digital banking
Categories: Fraud & Financial Crime
Companies: FIU, Paytm
Countries: India
This article is part of category

Fraud & Financial Crime




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