Paytm Payments Bank Fined INR 5.49 Cr For Money Laundering Violations

Paytm Payments Bank is a digital banking platform that offers savings accounts, debit cards, and payment services to its customers. The bank is a subsidiary of One97 Communications, the parent company of Paytm, India’s largest digital payments company. The bank was launched in 2017, with the aim of providing financial inclusion and convenience to the masses.

However, the bank has been facing regulatory troubles since its inception. The bank has been penalized by the Financial Intelligence Unit-India (FIU-IND), the central agency responsible for combating money laundering and terrorist financing in India. The FIU-IND has imposed a monetary penalty of INR 5.49 Cr on the bank for violating the Prevention of Money Laundering Act (PMLA), 2002.

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The FIU-IND initiated a review of the bank’s operations after receiving information from law enforcement agencies about a few entities engaged in a number of illegal acts, such as cheating, fraud, forgery, and impersonation, using the bank’s accounts and services. The FIU-IND found that the bank had failed to comply with its obligations under the PMLA, such as:

• Reporting suspicious transactions to the FIU-IND within the prescribed time limit.
• Verifying the identity and address of the customers before opening their accounts or providing them services.
• Maintaining records of the transactions and the identity documents of the customers for at least five years.
• Appointing a principal officer and a designated director to ensure compliance with the PMLA and the rules and regulations issued thereunder.
• Conducting an internal audit and submitting a compliance report to the FIU-IND every year.

The FIU-IND said that the charges against the bank were substantiated based on the voluminous material available on record and the bank’s submissions. The FIU-IND also said that the bank had shown a “casual approach” and a “lack of commitment” towards compliance with the PMLA and the rules and regulations issued thereunder.

The penalty imposed by the FIU-IND adds to the troubles of the bank, which is an associate of Paytm, India’s most valuable startup. The bank is already under the scrutiny of the Reserve Bank of India (RBI), which had barred the bank from onboarding new customers in March 2020, after finding deficiencies in its regulatory compliance. The RBI had also imposed a penalty of INR 5.39 Cr on the bank in October 2023, for violating the KYC norms.

The penalty also raises questions about the bank’s governance and risk management practices, as well as its ability to prevent and detect money laundering and terrorist financing activities. The penalty also affects the bank’s reputation and credibility, as well as its customer trust and confidence.

The bank has said that it has taken corrective measures and implemented remedial actions to address the issues raised by the FIU-IND. The bank has also said that it is committed to complying with the PMLA and the rules and regulations issued thereunder, and to providing safe and secure banking services to its customers.

Paytm Payments Bank is a digital banking platform that has been fined by the FIU-IND for violating the PMLA. The bank has been accused of not reporting suspicious transactions, not verifying customers’ identities, and not maintaining records. The penalty adds to the troubles of the bank, which is already under the RBI’s radar and has been barred from onboarding new customers. The penalty also raises questions about the bank’s governance and risk management practices, as well as its ability to prevent and detect money laundering and terrorist financing activities. The bank has said that it has taken corrective measures and implemented remedial actions to address the issues raised by the FIU-IND.