Regulatory Agencies Seek RBI Insight on Paytm Operations

In response to a ban imposed by the Reserve Bank of India (RBI) on Paytm Payments Bank Ltd (PPBL), which prevents the entity from onboarding new customers or accepting additional deposits, the Enforcement Directorate (ED) and the Financial Intelligence Unit (FIU) are now seeking a detailed report from the RBI. The ED and FIU, which are federal agencies responsible for enforcing the Prevention of Money Laundering Act (PMLA), aim to determine whether further investigation into Paytm's activities is warranted.

ED and FIU Investigate Under PMLA

The ED and FIU's ongoing scrutiny under the PMLA involves closely examining the operations of payment gateways like Paytm for potential violations. After the RBI's restrictive measures on PPBL, the ED has expressed the need to review the central bank's report to consider whether there are grounds to launch a separate investigation into PPBL or to incorporate new findings into existing probes concerning Paytm.

These probes initially stemmed from examinations into money laundering activities of several mobile applications with purported links to Chinese firms, which allegedly leveraged merchant IDs on fintech platforms like Paytm for illicit fund transfers.

FIU's Role Under PMLA

The FIU is also keen to understand if Paytm and PPBL have complied with the anti-money laundering requirements as a 'reporting entity' under Section 13 of the PMLA, which mandates that financial bodies maintain detailed records of all transactions and client information, in accordance to the law.

As an agency operating under the Ministry of Finance, the FIU holds authority to penalize 'reporting entities' that violate specific sections of PMLA with fines ranging from Rs 10,000 to Rs 1 lakh per infraction. The RBI's action against PPBL, taken on January 31, led to the entity being barred from accepting further customer deposits effective February 29.

Despite the ban, PPBL customers are allowed to use existing balances for withdrawals or transactions without any restrictions until the said balances are depleted, after which no further additions to accounts will be permitted.

FIU, ED, RBI