The Enforcement Directorate has determined that there were no violations of FEMA in the Paytm Payments Bank case.
During its investigation, the central agency scrutinized over 50 lakh accounts and wallets, according to the report.
The Hindu has reported, citing sources familiar with the matter, that the Enforcement Directorate (ED) has found no breaches of the Foreign Exchange Management Act (FEMA) in the instance of Paytm Payments Bank Limited (PPBL).
According to the report, only the top regulatory authority, the Reserve Bank of India (RBI), has the authority to take action against certain other cases of purported non-compliance. This follows the RBI’s move on January 31 to prohibit PPBL from onboarding new customers after February 29, citing “persistent non-compliance.”
‘Money laundering probe not possible’
According to the sources, the case involving PPBL, the banking division of Noida’s fintech leader Paytm, does not involve any scheduled offence under the Prevention of Money Laundering Act (PMLA), making it ineligible for a money laundering probe.
A government official informed the English daily, stating that if no criminal activity is established, there are no “proceeds of crime” generated, thus rendering the Prevention of Money Laundering Act (PMLA) inapplicable. Therefore, the Enforcement Directorate scrutinized the financial transactions to ascertain any breaches under the provisions of FEMA.
The Enforcement Directorate is a central agency responsible for investigating suspected breaches or infractions under FEMA, as well as the Prevention of Money Laundering Act (PMLA).
The ED probe
According to reports, the agency scrutinized over 50 lakh accounts and wallets, yet found no breaches of foreign exchange regulations. The remaining purported violations primarily revolved around Know Your Customer (KYC) compliance and other matters, which fall under the exclusive jurisdiction of the RBI for enforcement.
The findings of the ED, along with specific observations concerning payment banks (excluding PPBL), third-party application providers, and payment aggregators, have been forwarded to the RBI. The central bank may initiate suitable measures in response.
The concerns raised by the agency encompass deficiencies in complying with KYC regulations, procedures for determining ultimate beneficial ownership and politically exposed persons, adherence to KYC requirements for establishing virtual accounts, and rigorous monitoring and regular reporting of suspicious transactions to authorized bodies like the Financial Intelligence Unit (FIU).
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