Finance Ministry imposes Rs. 5.49cr fine on Paytm Payments Bank
India's Financial Intelligence Unit (FIU) has slapped Paytm Payments Bank, Paytm's banking division, with a hefty penalty of Rs. 5.49 crore for failing to report illegal monetary transactions through its accounts. The Ministry of Finance has revealed that the FIU began investigating after law enforcement agencies discovered entities involved in illegal activities, such as online gambling, using the bank to route their proceeds. Interestingly, the penalty is linked to a business segment that Paytm Payments Bank discontinued two years ago.
Violations in reporting suspicious transactions
The FIU found that Paytm Payments Bank neglected to report suspicious transactions and didn't properly investigate the accounts linked to illegal operations. The Finance Ministry explained, "The money generated from these illegal operations, i.e., proceeds of crime, were routed and channeled through bank accounts maintained by these entities with the Paytm Payments Bank." The FIU's investigation confirmed the allegations against Paytm Payments Bank based on substantial evidence.
Improving monitoring systems and reporting mechanisms
In response to the fine, a Paytm Payments Bank spokesperson said, "The penalty pertains to issues within a business segment that was discontinued two years ago." The company has since improved its monitoring systems and reporting mechanisms to the FIU, they added. This came after Paytm announced it would end several inter-company agreements with Paytm Payments Bank due to ongoing regulatory action by the Reserve Bank of India (RBI).
Vijay Shekhar Sharma's resignation from the board
On February 26, Vijay Shekhar Sharma stepped down from the board of Paytm Payments Bank to allow for board reconstitution, according to a filing. The company is now searching for a new chairman. This decision followed the RBI imposing significant business restrictions on Paytm Payments Bank for a history of non-compliance by Paytm promoters, including violations of KYC and anti-money laundering norms. Following the penalty announcement, Paytm's stock dropped 2% to Rs. 414.55 on Saturday noon.
