Finance Ministry’s Financial Intelligence Unit imposes ₹5.49 crore fine on Paytm Payments Bank for PMLA lapses

The bank was found to be in breach of anti-money laundering, counter-terrorism financing and KYC norms, letting some entities route illegal activities’ proceeds through its accounts

The Financial Intelligence Unit-India has slapped a ₹5.49 crore penalty on Paytm Payments Bank Limited (PPBL) for violations of the Prevention of Money Laundering Act (PMLA). | Photo Credit: GIRI KVS

The Financial Intelligence Unit-India under the Union Finance Ministry has slapped a ₹5.49 crore penalty on Paytm Payments Bank Limited (PPBL) for violations of the Prevention of Money Laundering Act (PMLA), after finding substantial proof of money generated from illegal activity being routed through accounts held by some entities with the bank. 

The FIU-IND had initiated a review of the PPBL’s operations after receiving “specific information” from law enforcement agencies about a few entities and their network of businesses engaging in “a number of illegal acts, including organising and facilitating online gambling”, the agency said in a statement on Friday about the penalty order issued on March 1, 2024.

“Further, the money generated from these illegal operations, i.e. proceeds of crime were routed and channelled through bank accounts maintained by these entities with the Paytm Payments Bank Ltd,” it said.

Documents pertaining to such activity were scrutinised and a Show Cause Notice was served on the bank for violating multiple regulations laid down in the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. These included breaches of the rules pertaining to safeguards to be adopted for Anti-Money Laundering, Counter-Terrorism Financing and Know Your Customer or KYC processes for beneficiary accounts and payout services.

“After considering the written and oral submissions of the Paytm Payments Bank Ltd, Director, FIU-IND, based on the voluminous material available on record, found that the charges against Paytm were substantiated,” the agency said, adding that a monetary penalty of ₹5.49 crore was imposed in an order passed under Section 13 of the PMLA.

A PPBL spokesperson said, “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 FIU is India’s national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions to enforcement agencies and its foreign counterparts.