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Paytm Payments Bank failed to detect & report dubious transactions, says FIU on ₹5.49 crore penalty order


Paytm Payments Bank, which was slapped with a fine of 5.49 crore for money laundering, had failed to put in place an internal mechanism to detect and report suspicious transactions as stipulated under the anti-money laundering law, the Financial Intelligence Unit (FIU) said in its order. 

According to a PTI report, the FIU had said that the charges against the Paytm lender under the Prevention of Money Laundering Act (PMLA) were substantiated after more than four years of investigation and a showcase notice was issued against it on February 14, 2022. The penalty was imposed on the Paytm entity after its chairperson Vijay Shekhar Sharma had resigned from the post. 

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A Paytm Payments Bank spokesperson had said that the FIU penalty pertains to issues within a business segment discontinued two years ago. “Following that period, we have enhanced our monitoring systems and reporting mechanisms to the Financial Intelligence Unit (FIU),” the spokesperson had said in a statement. 

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A Paytm Payments Bank spokesperson had said that the FIU penalty pertains to issues within a business segment discontinued two years ago
A Paytm Payments Bank spokesperson had said that the FIU penalty pertains to issues within a business segment discontinued two years ago

‘Proceedings against Paytm Payments Bank began in 2020’, says FIU

It is wrong to say that trouble for Paytm Payments Bank began on January 31 when the Reserve Bank of India (RBI) barred it from accepting new deposits. As per the FIU order, proceedings against this entity had begun in 2020 on a reference by law enforcement agencies about “extensive illegal activity conducted by multiple businesses under the syndicate of individuals connected to a foreign state” and subsequent filing of FIRs by the cyber crimes unit of the Hyderabad Police under various sections of the IPC and the Telangana State Gambling Act.

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As per the police complains, certain entities and their network of businesses were engaged in a number of illegal acts, such as organising and assisting online gambling, and the money obtained from these illegal operations were “routed and channelled” through bank accounts maintained by the same entities with the bank (Paytm Payments Bank), PTI reported.

According to the FIU, public reports pointed to such entities found to have cheated lakhs of Indians through fraudulent services including gambling, dating and streaming services prohibited by law.

“The proceeds of these fraudulent activities were subsequently remitted abroad and several of the involved entities made use of payment intermediaries to implement their fraudulent designs within the country,” the order said.

The Financial Intelligence Unit charged Paytm Payments Bank for failure to “put in place an internal mechanism to detect and report suspicious transactions in the manner prescribed under the PMLA and PML Rules including with reference to its payout service and accounts of the entities in question”.

The lender has also been charged by the FIU of “failing” to exercise ongoing due diligence with respect to its payout service and accounts of entities in question relating to the same service.

It has also been charged by the FIU for its “failure” to satisfy the requirements with respect to reliance on third-party KYC, by relying on a non-compliant or unregulated entity in violation of the section 12 of the PMLA that speaks about maintenance of records by reporting entities.

(With PTI inputs)



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