India's Financial Intelligence Unit has levied a penalty of Rs 5.49 crore on Paytm Payments Bank for alleged involvement in money laundering activities. The action follows the routing of proceeds of crime through bank accounts held with the lender by entities engaged in illegal activities, including online gambling facilitation.
The Finance Ministry arm initiated a review of Paytm Payments Bank based on specific information from law enforcement agencies regarding certain entities and their illicit operations. This scrutiny prompted the Reserve Bank of India to direct PPBL to cease most banking services by February 29, later extended to March 15.
“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," a release from the Finance Ministry said.
Paytm's decision to sever business ties with its banking affiliate aims to address regulatory concerns seeking clearer delineation between the two entities. The company stated intentions to simplify the shareholder agreement of Paytm Payments Bank Ltd., underscoring efforts to bolster governance practices.
Although both Paytm and Paytm Payments Bank belong to Vijay Shekhar Sharma’s fintech empire, the bank operates independently of the publicly traded mobile wallet pioneer.