FIU-IND Slaps Penalty Worth Rs 5.49 Crore On Paytm Payments Bank For Money Laundering Violations

The Financial Intelligence Unit-India (FIU-IND) has imposed a penalty of Rs 5.49 crore on Paytm Payments Bank Ltd for serious breaches of the Prevention of Money Laundering Act (PMLA). The Ministry of Finance, in a press release on Friday, March 1, revealed that the penalty comes in response to the bank's involvement in facilitating illegal activities, particularly in connection with online gambling.

The FIU-IND, prompted by specific information received from law enforcement agencies, initiated a thorough review of Paytm Payments Bank Ltd. This information implicated certain entities engaged in a web of illicit activities, with the bank playing a crucial role in the orchestration and facilitation of online gambling.

The released statement disclosed, "The money generated from these illegal operations, i.e., proceeds of crime, was routed and channelled through bank accounts maintained by these entities with Paytm Payments Bank Ltd." This revelation sheds light on the severity of the violations and the integral role the bank played in the illicit financial network.

The FIU-IND issued a compliance show cause notice to Paytm Payments Bank, outlining multiple violations, including breaches of PML Rules, contravention of Anti-Money Laundering (AML) and know your customer (KYC) safeguards, and violations related to AML/CFT/KYC in the context of payout services and beneficiary accounts.

After careful consideration of both written and oral submissions from Paytm Payments Bank Ltd, the director of FIU-IND, relying on evidence, concluded that the charges against the bank were well-founded. In a statement, the FIU-IND declared, "Consequently, vide order dated February 15th, 2024, in the exercise of his powers under Section 13, PMLA, it was found to be appropriate to impose a penalty of Rs. 5,49,00,000."

Responding to the penalty, a spokesperson for Paytm Payments Bank stated, "The penalty pertains to issues within a business segment that was discontinued two years ago. Following that period, we have enhanced our monitoring systems and reporting mechanisms to the Financial Intelligence Unit (FIU)."

The revelation that the penalized business segment was discontinued two years ago raises questions about the efficacy of the bank's internal controls during that time. It also underscores the importance of robust monitoring systems and reporting mechanisms in financial institutions to curb illicit activities and comply with regulatory frameworks.

The shares of Paytm were seen trading with gains of nearly 3% at Rs 414.40 per share during the second phase of the special trading session on March 2 (Saturday) as of 12:15 pm.