RBI Investigates More Banks for Compliance Amid Money Laundering Concerns

RBI Investigates More Banks for Compliance Amid Money Laundering Concerns

Following the Reserve Bank of India's recent scrutiny of Paytm Payments Bank, more banks are now under investigation for compliance with regulatory standards aimed at combating money laundering, as reported by The Economic Times. The Financial Intelligence Unit (FIU) has identified approximately 50,000 bank accounts lacking proper know-your-customer (KYC) documentation, raising suspicions of money laundering. While 30,000 of these accounts were associated with Paytm Payments Bank, further inquiry is underway regarding the remaining accounts.

The FIU has submitted a comprehensive report on this matter to the Reserve Bank of India (RBI), which has requested additional information, according to the ET report.

Major deficiencies observed in payment banks include neglecting to scrutinize suspicious transactions, discrepancies in KYC documents, and the registration of multiple accounts using a single PAN number, the report states.

The FIU has been instructed to furnish a detailed report to the RBI by March 31. A senior government official informed ET, “Out of 175,000 non-compliant accounts, 50,000 were found to be involved in suspicious activities indicative of money laundering.”

Furthermore, the official mentioned that the FIU had provided the RBI with a report on Paytm Payments Bank four months ago. The list of infractions by the Paytm bank extends beyond KYC violations to include other irregularities.

Subsequently, the FIU has expanded its investigation to other payment banks, requesting information under Section 13 of the Prevention of Money Laundering Act (PMLA).

Regarding the Paytm Payments Bank controversy, the RBI set a deadline of February 29 for the bank to cease all transactions and deposits, following a regulatory oversight revealed in an FIU report.

The Enforcement Directorate (ED) was also investigating the Mahadev app scam and identified around 10,000 UPI accounts registered with Paytm allegedly involved in money laundering.

In response to the RBI's action against Paytm Payments Bank, its parent company One 97 Communications clarified that no ED investigation had been initiated against the company for money laundering or FEMA violations, dismissing such reports as “malicious”.

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