ED inquires Paytm representatives; gathers documentation; if anomalies are discovered, a FEMA investigation will be conducted

The Enforcement Directorate (ED) has questioned senior Paytm officials and obtained documents from them following the recent action of the Reserve Bank of India to bar Paytm Payments Bank Limited from accepting deposits or top-up to any customer's account. According to official sources, the central agency is conducting a preliminary examination of the documents before deciding to initiate a formal investigation into alleged irregularities under the Foreign Exchange Management Act (FEMA) in the RBI-marked fintech company.

After the submission of certain documents, questions have been posed to Paytm officials. According to sources, further information has been looked for. Sources claim that no anomalies have been found thus far, and a FEMA case will only be filed if a violation of the relevant statute is discovered.

According to sources, there has been a long-running investigation into Paytm under the Prevention of Money Laundering Act (PMLA). A notice has been sent to One97 Communications, a company that offers financial services under the Paytm brand, and its banking subsidiary, Paytm Payments Bank, requesting that they furnish details about the clients of their respective businesses. Paytm said that its subsidiary Paytm Payment Bank does not do the business of remittance from abroad.

On the other hand, Paytm has said in a regulatory filing that One 97 Communications Limited (OCL), its subsidiaries and its associate Paytm Payments Bank Limited have received information from authorities including the Enforcement Directorate (ED) regarding customers doing business with the related entities. Notices and demands for documents and clarifications have been received from time to time, and necessary information, documents and clarifications have been provided to the authorities. Paytm said the company and its affiliates are providing information, documents and clarifications to the authorities as required.

Earlier this month, the Enforcement Directorate and the Financial Intelligence Unit had asked the RBI to share its report on its recent action to stop Paytm Payments Bank Ltd from accepting deposits or top-ups into customer accounts. On January 31, the central bank gave it instructions to cease taking deposits or top-ups in any client accounts, wallets, Fastag, and other devices after February 29. As part of a money laundering investigation against Chinese-controlled mobile phone apps that are suspected of using merchant IDs generated on these fintech platforms to launder money, the ED is looking into Paytm and other online payment wallets.

To determine if Paytm or PPBL had adhered to the requirements set forth as a "reporting entity" under Section 13 of the PMLA, the Financial Intelligence Unit (FIU) has also requested a report from the RBI. Under this section of the Anti-Money Laundering Act, a financial institution, bank or other market is required to furnish to the FIU information about the records it maintains of all transactions and documents certifying the identity of its customers and beneficial owners.