Ominous intelligence: More payments banks under regulatory lens

It could well be that the Paytm Payments Bank episode is just a trailer while the full film is yet to begin. Thousands of customers without identity proof conducting transactions for years. If that, in a nutshell, has led to regulatory action against Paytm Payments Bank, then more might be in the line for the RBI stick, The Economic Times has reported since the Financial Intelligence Unit (FIU) has detected close to 50,000 accounts that are merrily conducting transactions that arouse suspicion of money laundering activities. The number of accounts where Know Your Customer compliance has not been followed is well above three times the number suspected of money laundering.

The FIU is an investigation wing of the Union finance ministry that draws its power from the Prevention of Money Laundering Act (PMLA).

According to the report, almost 60% of these accounts are with payments banks other than Paytm Payments Bank. The details of these accounts and their transaction have been handed over to the central bank that is keen to dig deeper and has asked for more information. FIU is expected to dispatch details to RBI before the end of the current financial year. The FIU will send a detailed report on deficiencies affecting the payments banks before March 31.

The management of the banks with whom such accounts are kept could be accused of non-reporting of suspicious transactions, non-maintenance of details of beneficial owners and even multiple users using a single PAN (permanent account number) to legitimise their transactions.

“There were 175,000 accounts which were non-compliant, out of which 50,000 were engaged in activities which were suspicious in nature and used for money laundering,” a senior government official told ET.

The official, who preferred anonymity, told the newspaper that the FIU report on Paytm Payments Bank was given to the central bank four months ago. The last report that it submitted to the RBI contains details of the violations that went beyond non-compliance of KYC.

According to the rule, all entities including payment gateways have to report suspicious transactions to the FIU, which scan and analyses the data/information and sends it to bodies such as the Directorate of Enforcement and regulatory authorities such as the RBI for further action.

The PMLA in section 13 says that a bank, or NBFC or financial intermediary must send details to the FIU about maintaining records of all transactions and documents on the identity of clients and beneficial owners. In fact, even account files and business correspondence relating to clients have to be brought to the notice of the FIU.

On January 31, the RBI directed Paytm Payments Bank to stop all basic payment services through all platforms and avenues, including the popular UPI, effective February 29. Incidentally, while the Enforcement Directorate was investigating the scam involving Mahadev app, it stumbled upon as many as 10,000 UPI accounts with Paytm that were used purportedly for money laundering.

Paytm bosses have already been quizzed by ED officials in connection with the case.
In a filing with the regulatory body, Paytm bosses had earlier said, “One 97 Communications Limited (OCL), its subsidiaries and its associate, Paytm Payments Bank Limited, have over time been receiving notices and requisition for information, documents and explanations from the authorities, including Enforcement Directorate (ED), with respect to the customers that may have done business with the respective entities, and provided the required information, documents and explanations to the authorities.”