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The Financial Intelligence Unit-India (FIU-IND) has imposed a substantial penalty of ₹5.49 crore on Paytm Payments Bank Ltd (PPBL) for violating the Prevention of Money Laundering Act (PMLA). This penalty follows the Reserve Bank of India's (RBI) directive on January 31, instructing PPBL to cease accepting deposits or top-ups due to significant non-compliance with regulations.
Background and Enforcement Measures
Shares of Paytm plummeted on February 1, 2024, after the banking regulator's order, dealing a severe blow to the mobile payments giant. The FIU-IND's action comes in response to leads provided by law enforcement agencies regarding illicit money movements through PPBL's channels.
The finance ministry stated, "FIU-IND initiated a review of Paytm Payments Bank Ltd based on specific information from law enforcement agencies, highlighting illegal activities such as organizing online gambling." The ministry further added that funds from these illicit operations were channeled through bank accounts held by entities with PPBL.
Imposition of Penalty and Paytm's Response
After scrutinizing documents and considering written and oral submissions from PPBL, the director of FIU-IND found the charges substantiated. Consequently, on March 1, a penalty of ₹5.49 crore was imposed under PMLA. Responding to the development, a Paytm spokesperson clarified that the penalty relates to issues within a discontinued business segment two years ago.
Paytm has proactively started reducing its business ties with its banking subsidiary, Paytm Payments Bank, aiming to establish an arms' length distance between the regulated and unregulated entities. One97 Communication, the listed entity, has notified stock exchanges about simplifying the shareholders' agreement to support governance, addressing concerns raised by regulators.
