Financial Intelligence Unit Imposes Penalty of Over Rs. 5 Crore on Paytm Payments Bank


India's Financial Intelligence Unit (FIU) on Friday imposed a fine of Rs. Paytm's banking arm, Paytm Payments Bank, will be fined ₹5,49,00,000 ($662,565) for violations in reporting illicit funds through its accounts, the country's finance ministry said.

The FIU initiated the review of Paytm Payments Bank following information from law enforcement agencies about certain entities involved in illegal activities, including organizing and facilitating online gambling and remitting proceeds through the bank.

“The funds generated from these illegal operations, i.e. the proceeds of crime, were routed through bank accounts maintained by these entities with Paytm Payments Bank,” the ministry said in a statement.

The FIU order said the payments bank failed to report suspicious transactions and properly investigate these accounts.

The ministry said that based on “detailed” material available on record, it was found that the allegations against Paytm Payments Bank were true.

A spokesperson for Paytm Payments Bank said the fine related to issues with a business segment that was shut down two years ago. The spokesperson said the company has since enhanced its monitoring systems and reporting mechanisms to the FIU.

Earlier in February, the Reserve Bank of India (RBI) had asked Paytm Payments Bank to shut down operations by March 15 due to persistent compliance issues and supervisory concerns.

Paytm had earlier said that it has received notices for information and clarifications from authorities, including the Enforcement Directorate, the financial crime fighting agency, and it is providing the same to them.

Meanwhile, Paytm has severed some ties with its payments bank unit in an effort to address compliance concerns, which had led to a decline in its shares last month.

Paytm CEO Vijay Shekhar Sharma holds 51 percent stake in Paytm Payments Bank, while Paytm owns the remaining stake.

Earlier this week, Sharma stepped down as non-executive chairman and board member of the payments bank unit in a major shake-up.

© Thomson Reuters 2024

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