The Financial Intelligence Unit-India (FIU-IND), in furtherance of the powers conferred upon the Director FIU-IND under Section 13(2)(d) of the Prevention of Money Laundering Act (PMLA), 2002, has imposed a monetary penalty of Rs. 5,49,00,000 (rupees five crore forty nine lakh) on Paytm Payments Bank Ltd with reference to the violations of its obligations under the PMLA read with the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules) issued thereunder and applicable guidelines and advisories issued by the Director FIU-IND.

FIU-IND initiated a review of the Paytm Payments Bank Ltd on receipt of specific information from law enforcement agencies in respect of few entities and their network of businesses engaged in a number of illegal acts, including organising and 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.

In furtherance of the above and upon scrutiny of the documents on record, FIU IND issued a compliance Show Cause Notice to the bank for its violations of (i) Rules 7(3) and 2(1)(g), PML Rules; (ii) violation of Rule 8(2) read with Rule 3(1)(D) and Rule 2(1)(g); (iii) violation of Rule 9(12), PML Rules; and (iv) violation of Rule 9(14) in terms of AML / CFT / KYC safeguards in respect of Payout services; and AML / CFT / KYC in respect of beneficiary accounts.

After considering the written and oral submissions of the Paytm Payments Bank Ltd, Director, FIU-IND, based on the voluminous material available on record, found that the charges against Paytm were substantiated. Consequently, vide order dated March 1^st, 2024 in exercise of his powers under Section 13, PMLA, it was found to be appropriate to impose a penalty of Rs. 5,49,00,000.

PMLA compliance breach prompts monetary enforcement for AML/CFT and KYC failures in payments bank accounts. Financial intelligence enforcement found deficiencies in a payments bank's record-keeping, transaction monitoring and customer due diligence after information that proceeds from illegal online gambling were routed through its accounts. A Show Cause Notice alleged failures under rules on maintenance of records, customer identification, reporting obligations and AML/CFT/KYC safeguards for payout and beneficiary services. On review of submissions and material on record, the Director exercised statutory authority to impose a monetary penalty as an enforcement measure to address the substantiated compliance lapses.