Paytm Payments Bank Hit With Rs. 5.49 Crore Penalty Over Money Laundering

Paytm Payments Bank might’ve already been directed to stop all user deposits and shut down its nodal accounts, but the troubles for the bank might not have quite ended.

Paytm Payments Bank has been hit with a Rs. 5.49 crore penalty by the Financial Intelligence Unit (FIU). The penalty was imposed under the Prevention of Money Laundering Act. The FIU found that proceeds of crime were routed through accounts at Paytm Payments Bank, and the bank did not have proper procedures in place to prevent them.

The FIU had carried out a review of Paytm Payments Bank Limited after receiving specific information from law enforcement agencies about entities engaged in illegal acts. After an investigation, it was found that proceeds of crime were channeled through bank accounts of these entities at Paytm Payments Bank. The FIU had then issued a show-cause notice to Paytm Payments Bank for violation of Prevention of Money Laundering rules. The Rs. 5.49 crore penalty was imposed after considering the written and oral submissions of the bank.

The penalty comes days after Vijay Shekhar Sharma, the majority shareholder in the bank, had resigned from the board. His resignation had come after weeks of drama following strict curbs that had been imposed on the bank by the Reserve Bank. The regulator had essentially crippled the the operations of the bank, disallowing it from accepting new customer deposits, or use services like FasTag.

The action had felt harsh to many, but the charges against the bank had appeared to be serious — it had been reported that Paytm Payments Bank had inadequate KYC procedures in place, which had allowed up to a thousand bank accounts be linked to the same PAN number. It now appears that this wasn’t mere oversight, but proceeds of crime were being illegally channeled through these fraudulent bank accounts.

The latest penalty will come as a fresh blow for Paytm, which is already reeling under the impact of these curbs, and is seeing rivals chip away at its marketshare in the payments business. The company, however, had consistently denied any wrongdoing on its part. But with a penalty being imposed on the bank for allegedly allowing money to be laundered through its accounts, the taint of money laundering be the biggest challenge yet for the beleaguered payments company.