Paytm denies any Enforcement Directorate probe into money laundering

One97 Communications Ltd (OCL), the parent firm of fintech major Paytm, has denied reports about any investigation by the Enfo­rcement Directorate (ED) into the company, its associates, and its fou­nder and chief executive officer (CEO), Vijay Shekhar Sharma.

The company, in an exchange filing on Sunday, said it had cooperated with the authorities when users or merchants on its platform were subject to enquiries in the past.

“We would like to set the record straight and deny any involvement in anti-money laundering activities.

"We continue to abide by Indian laws and take regulatory orders with utmost seriousness,” it said.

Meanwhile, the company has cautioned against speculation on reasons that prompted the Reserve Bank of India (RBI) to take action against Paytm Payments Bank.

“For this action, we refer our stakeholders to the official press release of RBI dated January 31, 2024, and not rely on unofficial sources,” it added.

The company added: “In the past, certain merchants/users on our platforms have been subject to enquiries and on those occasions, we have always cooperated with the authorities.”

The company has called the RBI action an “ongoing supervisory engagement and compliance process”.

On January 31, the RBI said no further deposits or credit transactions or top-ups would be allowed in customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Card (NCMC) cards, etc., after February 29, 2024, other than any interest, cashback, or refunds that may be credited at any time.

Earlier, in March 2022, the RBI had directed Paytm Payments Bank to stop taking on board new customers on account of alleged know your customer (KYC) violations, and appoint an audit firm.

Violations of KYC norms, leading to money laundering concern, have prompted the RBI to clamp down on Paytm Payments Bank, sources told Business Standard last week.

According to reports, part of the concern included allegedly not maintaining an arm’s length with promoter group OCL, not disclosing payments to promoters, false submission of compliance, and overall disregard for compliance and transparency.

Major irregularities were found in the KYC process, which potentially put customers, including depositors, at risk, the paper reported last week.

KYC norms were allegedly not followed in a large number of accounts, and there were failures in validating permanent account numbers (PANs) in numerous accounts.

There were thousands of cases where a single PAN was linked to over 100 customers, and in some cases more than a thousand customers.

In addition, there were transactions in minimum KYC pre-paid instruments which were beyond the regulatory limits, raising money-laundering concern.

Unusually high numbers of dormant accounts, which could have been used as mule accounts, too were a reason for concern.

Deficiencies in the KYC process and lack of transaction monitoring added to money-laundering concern.

Accounts and wallets running into hundreds of thousands were frozen.