Following this announcement, the US-based payments gateway has finalised the formal procedure, which was designated as a reporting entity under the Prevention of Money Laundering Act (PMLA). The necessary documents required by the Financial Intelligence Unit (FIU) have also been submitted.
PayPal is also expected to appoint a director in order to comply with the directives of the Anti-Money Laundering (AML) law, as the company already assigned a principal officer.
The FIU is a national agency that takes charge of receiving, processing, analysing, and sharing the overall information on doubtful financial transactions in the Indian economic channels, to several enforcement agencies, companies, and foreign FIUs.
PayPal registered as a reporting entity with the Financial Intelligence Unit across India, in compliance with the Reserve Bank of India’s recent regulatory framework that governs the cross-border payment aggregators (PA-CB). This applies to the PA-CB industry to meet their customers' needs, preferences, and demands while keeping them protected in an ever-evolving industry.
The registration process happened about six years after a protracted legal conflict ensued between the two entities. PayPal and the Financial Intelligence Unit started their legal conflict back in March of 2018 after the national agency sought the global payments company’s registration as a reporting entity. This procedure was proposed to maintain a record of all of the transactions and report illicit payments, as well as a cross-border wire set of transfers to the Financial Intelligence Unit. At the same time, the process also aimed to identify the beneficiaries of these funds.
According to Republic World, PayPal was faced with a 1,158.03 USD (Rs 96 lakh) penalty by the Financial Intelligence Unit (FIU) towards the end of 2020, over allegations of not meeting the terms of the PMLA by not registering with it. In addition, the Reserve Bank of India circular followed the 1,158.03 USD (Rs 96 lakh) penalty against PayPal in order to regulate payment aggregators facilitated cross-border transactions, for the import and export of permissible services online.
The national agency’s penalty against PayPal was dismissed by a single-judge bench of the Delhi High Court in July 2023. In addition, the court directed PayPal to comply with reporting allegations, since it was liable to be seen as a payment system operator under the Prevention of Money Laundering Act (PMLA). PayPal filed an appeal later in August 2023 before a two-member bench of the Delhi High Court, aiming to quash the high court judgments while also asserting that it employed an impractical interpretation of the payments system under the PMLA.
Later in December 2023, PayPal informed the high court that it was in the process of registering itself with the FIU-IND (Financial Intelligence Unit – India), under the PA-CB Circular No.RBI/2023-24/80 dated 31st October 2023.
By sharing its suspicious transaction reports, PayPal enabled the FIU to share such information with Indian law enforcement agencies. The refusal to register led to the process of hiding illicit financial transactions, as well as contributing to the disintegration of India’s financial system. It also represented a risk factor to the country’s financial system.
PayPal referred to RBI guidelines that were followed to that point in time, as it started operating solely as an Online Payment Gateway Service Provider (OPGSP), or a payment intermediary in the region of India.
According to officials for the FIU, PayPal’s US parent reported suspicious transactions to the Financial CRIMES Enforcement Network, while the Indian entity defies the procedure in the country, and to similar agencies in Australia and the UK.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now