The Union Finance Ministry’s Financial Intelligence Unit has fined Paytm Payments Bank Rs 5.49 crore for violating the Prevention of Money Laundering Act, the government said on Friday.
The penalty comes as a further setback to the digital bank, which has been directed by the Reserve Bank of India to stop accepting fresh deposits from customers from March 15.
On Friday, the government said that the Financial Intelligence Unit had received information from law enforcement agencies about some entities engaging in illegal operations, including facilitating online gambling. “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,” an official press release read.
The Financial Intelligence Unit had earlier issued a show cause notice to the digital payments platform asking it to explain why action should not be taken against it for violating several norms under the Prevention of Money Laundering Act, including Know Your Client – or KYC – safeguards.
The ministry said that the charges were substantiated “after considering the written and oral submissions” received from Paytm Payments Bank and the material available on record.
A spokesperson for Paytm Payments Bank spokesperson said that the order pertained to a business segment that was discontinued two years ago, PTI reported. “Following that period, we have enhanced our monitoring systems and reporting mechanisms to the Financial Intelligence Unit,” the spokesperson added.
Earlier this week, the digital payment platform’s founder, Vijay Shekhar Sharma, resigned as part-time non-executive chairperson and board member of Paytm Payments Bank Limited.
One 97 Communications Limited, which owns Paytm, also said that it would withdraw its nominee from the Paytm Payments Bank Board and support the move for a board with only independent and executive directors.
The development came after the Reserve Bank of India on January 31 barred Paytm Payments Bank from accepting fresh deposits or top-ups in any customer accounts, wallets or prepaid instruments after February 29. The deadline was later extended to March 15.
The central bank had also directed that from March 15, Paytm Payments Bank should not provide any other banking services such as Aadhaar Enabled Payment System, Immediate Payment Service, Bharat Bill Payment Operating Unit and Unified Payments Interface.
The central bank said that a comprehensive system audit report and subsequent reports by external auditors “revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action”.
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