Paytm Payments Bank struck with Rs 5.49 crore fine for money laundering violations

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The Financial Intelligence Unit-India (FIU-IND), under the purview of the finance ministry, has imposed a hefty fine of Rs 5.49 crore on Paytm Payments Bank for breaching obligations outlined in the Prevention of Money Laundering Act (PMLA).

According to a statement released by the finance ministry on Friday on the Press Information Bureau, FIU-IND initiated a comprehensive review of Paytm Payments Bank following specific intelligence received from law enforcement agencies. This information highlighted the involvement of certain entities and their network in various illegal activities, notably the organization and facilitation of online gambling. The proceeds from these illicit operations were allegedly routed through bank accounts held by these entities with Paytm Payments Bank.

In response to the penalty, a spokesperson for Paytm Payments Bank clarified that the violations in question are related to a business segment that was discontinued two years ago. In a statement to The Economic Times, they further stated that since then, the bank has significantly strengthened its monitoring systems and reporting mechanisms to ensure compliance with regulatory requirements.

The FIU-IND, empowered by Section 13(2)(d) of the PMLA, issued a monetary penalty of Rs. 5,49,00,000 on Paytm Payments Bank Ltd after finding authenticated evidence of violations. The violations included breaches of various provisions of the PMLA, as well as the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, and relevant guidelines and advisories issued by the Director FIU-IND.

The scrutiny of documents led to the issuance of a compliance Show Cause Notice to Paytm Payments Bank, citing violations of specific rules related to anti-money laundering (AML), counter-terrorism financing (CFT), and Know Your Customer (KYC) safeguards, particularly concerning payout services and beneficiary accounts.

After careful consideration of both written and oral submissions from Paytm Payments Bank, the Director of FIU-IND concluded that the charges against the bank were well-founded. As a result, the penalty was imposed on March 1st, 2024, exercising the authority vested under Section 13 of the PMLA. This fine levied against Paytm Payments Bank shows the seriousness with which regulatory bodies approach instances of non-compliance, particularly concerning the integrity of financial institutions and their role in combating illicit financial activities.

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