The Business Segment On Which Rs 5.49 Crore Fine Imposed Was Discontinued 2 Years Ago: Paytm

After the Financial Intelligence Unit India, (FIU-IND) a Department of the Revenue, Government of India, imposed a fine of Rs 5.49 crore to the finetech firm Paytm Payment bank for the alleged violation of the obligations under the Prevention of Money Laundering Act (PMLA), Paytm issued a clarification to Timeline. The fintech company has told Timeline that the said penalty pertains to issues within a business segment that was discontinued two years ago. They have also told Timeline that Paytm has since then enhanced their monitoring systems and reporting mechanism to the concerned department of the finance ministry.

The FIU’s fine on the fintech company was followed the recent order by the Reserve Bank of India to the Paytm Payment Bank to end accepting fresh deposits in its accounts or wallets from March 15. However, the latest blow to the firm with a heavy fine came after the FIU-IND reviewed the Paytm Payments bank based on the specific information from the law-enforcement agencies alleging illegal acts.

“We would like to inform that the penalty pertains to issues within a business segment that was discontinued two years ago. Following that period, we have enhanced our monitoring systems and reporting mechanisms to the Financial Intelligence Unit (FIU),” Paytm informed Timeline.

A government release has said that its review saw the firm engaging in several illegal acts, including organising and facilitating online gambling. It also noted that the money generated from illegal operations was channelled through bank accounts with the Paytm Payment Bank. The release said that it had issued a compliance show cause notice to the bank for its violations citing the rules.

“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 1st, 2024 in the exercise of his powers under Section 13, PMLA, it was found to be appropriate to impose a penalty of Rs. 5,49,00,000,” the release added.

Meanwhile, in a development, One 97 Communications Ltd, the parent company of Paytm, has informed Bombay Stock Exchange (BSE) that the company and its associate entity, Paytm Payments Bank Limited (PPBL), have introduced additional measures to strengthen their approach towards independent operations of PPBL.

As part of this process to reduce dependencies, the disclaimer to the stock exchange said, Paytm and PPBL have mutually agreed to discontinue various inter-company agreements with Paytm and its group entities. “Further, the shareholders of PPBL have agreed to simplify the Shareholders Agreement (SHA) to support PPBL”s governance, independent of its shareholders. The Board of OCL approved the termination of agreements and amendment of SHA on March 1, 2024,” the disclaimer added.

Paytm had announced earlier that it would sign up new partnerships with other banks and take measures to provide seamless services for its customers and merchants. In its intimation to stock exchanges on Feb 1, 2024, the company had indicated the possible financial impact.