The embattled Paytm Payments Bank Ltd. (PPBL), a key player in India’s digital banking sector, has been hit with a not really financial penalty for non-compliance with anti-money laundering regulations. The Reserve Bank of India (RBI)’s Financial Intelligence Unit (FIU) has levied a fine of Rs 5.49 crore against the bank after discovering that it was used to channel funds derived from criminal activities.
The investigation by the FIU was triggered by specific leads provided by law enforcement agencies, which pointed to the involvement of several entities in illegal operations, notably online gambling. These entities reportedly utilized PPBL accounts to launder their illicit proceeds.
In response to these findings, a spokesperson for Paytm Payments Bank has acknowledged the penalty, clarifying that it relates to activities within a segment of their business that was terminated two years prior. The bank has since taken significant steps to bolster its compliance mechanisms with improved monitoring systems and strengthened reporting protocols to the FIU.
This penalty comes on the heels of a directive issued by the Reserve Bank of India (RBI) on January 31, wherein PPBL was ordered to suspend most of its banking operations by February 29, a deadline that was subsequently extended to March 15. This move by the RBI underscores the regulatory challenges faced by PPBL and highlights the stringent oversight exercised over banking operations concerning anti-money laundering measures.
Moreover, Paytm Payments Bank is actively restructuring its operations and corporate governance to better align with regulatory expectations. This includes severing certain business connections with its banking affiliate, thereby aiming to draw a more precise line of separation between Paytm and PPBL. This restructuring is part of broader efforts by Paytm‘s founder, billionaire Vijay Shekhar Sharma, to ensure compliance and maintain the integrity of his fintech ventures, including the publicly traded Paytm and the closely regulated PPBL.
