The Financial Intelligence Unit of India (FIU) on Friday imposed a fine of Rs. 5,49,00,000 ($662,565) to Paytm’s banking arm, Paytm Payments Bank, for violations in reporting illegal money diverted through its accounts, the country’s finance ministry said.

The FIU initiated an investigation into Paytm Payments Bank following information from law enforcement authorities about certain entities involved in illegal activities, including organizing and facilitating online gambling, and routing proceeds through the bank.

“The money generated by these illegal operations ie. the proceeds of crime were channeled and channeled through bank accounts maintained by these individuals at Paytm Payments Bank,” the ministry said in a statement.

The payments bank failed to report suspicious transactions and conduct due diligence on these accounts, the FIU order said.

Based on the “voluminous” material available, it found that the allegations against Paytm Payments Bank were substantiated, the ministry added.

The penalty relates to problems in a business segment that was discontinued two years ago, a Paytm Payments Bank spokesperson said. The company has since improved its monitoring systems and reporting mechanisms to the FIU, the spokesperson added.

Earlier in February, the Reserve Bank of India (RBI) had asked Paytm Payments Bank to cease operations by March 15 due to persistent compliance issues and supervisory concerns.

Paytm had earlier said that it has received notices for information and explanations from the authorities, including the Financial Crimes Directorate, and is providing them with the same.

Meanwhile, Paytm has severed some ties with its payments banking arm in a bid to address compliance concerns that sent its shares tumbling last month.

Paytm CEO Vijay Shekhar Sharma owns 51% stake in Paytm Payments Bank, while Paytm owns the rest.

Earlier this week, Sharma stepped down as non-executive chairman and board member of the bank’s payments unit as part of an overhaul.

© Thomson Reuters 2024

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