Education Department finds no FEMA violation in Paytm Payments Bank case | Top Vip News

The Enforcement Directorate (ED) has not found any violation of the Foreign Exchange Management Act (FEMA) during the investigation into the transactions of Paytm Payments Bank Limited (PPBL). The Reserve Bank of India (RBI) has the authority to take action against other cases of alleged non-compliance, according to sources familiar with the matter.

On January 31, the RBI issued a circular prohibiting PPBL from making further deposits, recharges or carrying out credit transactions in its customers’ accounts, wallets, FASTags and National Common Mobility Cards (NCMC) after February 29. extended until March 15.

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The action was taken based on the Comprehensive System Audit report and a subsequent compliance validation report from external auditors’ reports revealing “persistent noncompliance and continuing material supervisory concerns at the bank, which justify additional supervisory actions.” .

The ED was also asked to examine financial transactions under the scanner. The agency investigates alleged violations or crimes under FEMA and the Prevention of Money Laundering Act (PMLA).

According to sources, as there are no PMLA scheduled offenses involved in the PPBL case, a money laundering investigation cannot be conducted. “If no crime is established, ‘proceeds of crime’ is also not generated and therefore the PMLA does not apply,” said a government official. Therefore, the ED examined the transactions to determine whether there was any violation under the provisions of FEMA.

KYC Compliance

It is learned that the ED examined more than 50 lakh wallets/accounts, mostly with small deposits, which did not reveal any contravention of foreign exchange norms. The other alleged violations mainly concerned Know Your Customer (KYC) compliance and other issues on which the RBI is empowered to take action. The ED’s findings have been reported to the RBI with certain observations regarding some other payments banks apart from PPBL, third-party app providers and also payment aggregators, a source said. The RBI may take appropriate action in this regard.

Areas of concern flagged by the agency include lack of compliance with KYC standards, such as processes involving user or merchant onboarding, document collection and authentication, anti-money laundering measures, merchant categories and regulatory compliance of the National Payments Corporation of India.

Other aspects include processes for identification of the beneficial owner, politically exposed persons, KYC compliance related to the creation of virtual accounts, strict monitoring and periodic reporting of suspicious transactions to authorized agencies, such as the Security Unit. Financial intelligence.

Since vulnerabilities such as possible misuse of application programming interface (API) keys and URL spoofing can lead to financial fraud, full adoption of the information technology audit framework prescribed by interested agencies.