In the case of Paytm Payments Bank Limited (PPBL), the Enforcement Directorate (ED) has not found any violation under the Foreign Exchange Management Act (FEMA), The Hindu has reported quoting people familiar with the development.
Only the apex Reserve Bank of India (RBI), which, on January 31, prohibited PPBL from onboarding new customers after February 29, cracking down due to ‘persistent non-compliance,’ is authorised to act against certain other instances of alleged non-compliance, the report stated.
‘Money laundering probe not possible’
As per the sources, there is no PMLA scheduled offence in the case of PPBL, the banking arm of Noida-based fintech major Paytm, and, therefore, a money laundering investigation cannot be done.
“If no crime is made out, there is no generation of ‘proceeds of crime’ and so, PMLA does not apply. The ED, therefore, looked into the financial transactions to determine if there was any violation under the FEMA provisions,” a government official told the English daily.
The Enforcement Directorate is a central agency that probes suspected violations or offences under FEMA, as well as the Prevention of Money Laundering Act (PMLA).
The ED probe
The agency is reported to have examined more than 50 lakh accounts and wallets; however, it did not find any foreign exchange rule contravention. The other alleged violations, meanwhile, pertained mainly to the Know Your Customer (KYC) compliance and other issues, on which the RBI alone is empowered to act.
The ED findings have been sent to the RBI with certain observations regarding payment banks (other than PPBL), third-party application providers, and payment aggregators, and the central bank could take appropriate action in this regard.
The issues flagged by the agency include ‘slackness’ in adherence to KYC norms; processes for identifying ultimate beneficial ownership, politically exposed persons, KYC adherence related to setting up of virtual accounts, and strict monitoring and periodic reporting of suspect transactions to the authorised agencies such as the Financial Intelligence Unit (FIU).