Paytm Business Bank to pay over $600k in fines after being charged with money laundering
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Indian authorities have fined Paytm’s banking business, issuing a 55 million rupee (~$663k) penalty on money laundering charges. The fine came from India’s Financial Intelligence Unit (FIU), which said that it reviewed the Paytm Payments Bank’s business, only to find it involved in illegal activities.
Indian regulators detect illegal activities and compliance issues with Paytm Bank
According to the regulator, Paytm has been involved with online gambling, and it channeled funds using accounts with the unit.
Paytm responded by saying that the fine pertains to issues within a business segment that was discontinued two years ago. In addition, the bank says that its monitoring systems have been boosted significantly in the meantime.
The bank also found itself under scrutiny from the Reserve Bank of India (RBI) lately, as the unit was hit by strict cubs due to compliance issues. The problems with the regulator sent its parent company’s share price spiraling down. Now, with the Financial Intelligence Unit’s new fine, chances are that the share price might dip even further.
Apart from accepting the fine, Paytm also made a move to reassure the central bank and the market of its compliance and legitimacy. To do it, the bank decided to cut various inter-company agreements.
Paytm Business Bank failed to report illegal transactions
FIU decided to initiate a review of Paytm Payments Bank after certain law enforcement agencies reported that the bank engaged in illegal acts. That included organizing and facilitating online gambling and using the bank to route the proceeds.
Commenting on the findings, the country’s finance ministry said: “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 report also said that the bank failed to conduct due diligence on these accounts or report suspicious transactions. This suggests that it either wasn’t monitoring the transactions adequately or that it was aware of them and it did nothing to stop them or investigate the matter, which suggests that these are no errors.
The ministry described materials available on record as “voluminous,” which is why it found the charges against the bank substantiated. As mentioned, Paytm’s spokesperson says that new monitoring and reporting mechanisms have been introduced since these issues took place. Meanwhile, the business segment within which the issues emerged has been discontinued.
As for RBI, it ordered the bank to wind down operations by March 15 due to common compliance issues and supervisory concerns. Paytm responded to that by saying that it received notices for information and explanations from the authorities and that it is willing to provide them.
