Paypal charged with INR 96 Lakh penalty for alleged violations of anti-money laundering laws

Source: BankBazaar

Paypal is a U.S.-based online payment platform that began its India operations in November 2017 and recently the company has been charged with INR 96 lakh penalty for allegedly violating anti-money laundering laws in India by the Financial Intelligence Unit (FIU).

The company has been accused of concealing financial transactions and abetting disintegration of India’s financial foundations.

According to Business Today, PayPal has been accused of and charged with defeating and frustrating- a) the provisions of PMLA, which stands for Prevention of Money Laundering Act and b) trust in public interest. These laws aim to protect the integrity of the country’s financial transactions and ensure safety from corruption-related transactions, black money transactions and other economic crimes that India has witnessed in the past.

The FIU is an active agency and it has probably taken strict actions against other companies operating in India and not adhering to the anti-money laundering laws, and provisions set under it. PayPal is the first online money payments platform that has been charged by the FIU.

The Financial Intelligence Unit operates under the Union Finance Ministry of India. Sources suggest that this battle between the FIU and PayPal began in early 2018 when the authority asked PayPal to register itself as a reporting company, for keeping a record of all transactions, keeping suspicious transactions in check and regulate cross-border wire transfers and also for identifying the beneficiaries of such transactions.

However, the payments gateway failed to register itself as a reporting company despite being ordered by the FIU and this is the number one reason for which the company is held guilty under FIU’s 27-page order that was issued on 17th December 2020. Registering oneself as a ‘reporting entity’ is mandated under the Prevention of Money Laundering Act.

According to reports by Business Today, Pankaj Kumar Mishra, Director, FIU exercises his powers conferred upon him under section 13(2)(d) of the PMLA, 2002 to impose a total fine of INR 96 Lakh on PayPal Payments Private Ltd. which shall commensurate with the violations committed by the company- part of the order issued by the FIU against PayPal.

Furthermore, the report gives the company 45 days to pay the fine and register itself as a reporting entity with the Financial Intelligence Unit (FIU), appoint a principal officer and director for further communications within the fortnight of the receipt of the order.

In all of this, PayPal spokesperson only mentioned that it is fully committed to the regulatory compliance and will carefully review the matter before commenting any further.