LI Network
Published on: February 6, 2024 at 10:15 IST
The Directorate of Enforcement (ED) has reached out to the Reserve Bank of India (RBI) seeking additional details regarding alleged breaches of the Foreign Exchange Management Act (Fema) by individuals and companies utilizing Paytm Payments Bank, according to sources familiar with the matter.
This move comes after the RBI notified the ED in late November 2023 about potential violations. Within ten days of receiving this information, the ED responded to the RBI in December, requesting specifics on the “entities” suspected of Fema violations.
It has also been reliably disclosed that the ED is considering contacting the RBI for further information on all entities possibly involved in Fema and other infringements across various mobile payment platforms, not limited to Paytm.
A government official, speaking on the condition of anonymity, disclosed that in December, the ED sought “further information” from the RBI to initiate a Fema investigation.
The requested information aims to identify entities potentially violating the law to take appropriate action against them. Additionally, details on entities making unusually large deposits in Paytm wallets were also sought.
The focus remains on investigating the entities that allegedly breached Fema regulations by transferring funds abroad via Paytm Payments Bank. The mobile payment platform itself is not considered the primary accused in this scenario.
Once the necessary information is obtained, the next steps will be determined. Potential penalties or actions against non-compliance with Know Your Customer (KYC) norms could be imposed by the RBI or the Financial Intelligence Unit (FIU) of the finance ministry.
However, any complicity by platform insiders can only be established after probing the primary violators. If found guilty, both the violators and any potential accomplices within the company will face prosecution.
Furthermore, entities depositing significant sums into Paytm Payments Bank may be required to provide explanations. If satisfactory, no action will be taken; otherwise, appropriate measures will be pursued, including under the Prevention of Money Laundering Act (PMLA) if money laundering is suspected.
Regarding allegations of a PMLA probe, a senior government official clarified that such an investigation requires a predicate offense, which is yet to be established in the case of Paytm Payments Bank.
ED will proceed with Fema investigations upon receiving the list of entities allegedly involved in violations or suspicious deposits in Paytm wallets.
Meanwhile, One 97 Communications, the parent company of Paytm, has refuted reports of ED investigations, asserting that neither the company nor its CEO is under investigation for money laundering.
RBI had instructed Paytm Payments Bank on January 31 to cease basic payment services, including through UPI, effective from February 29, for non-compliance with regulations, and barred it from offering banking services.