Paytm Denies An ED Probe Into Its Founder & Co Over Money Laundering

It seems the trouble at Paytm Payments Bank is not getting over any soon. After the Reserve Bank of India (RBI), It’s the Enforcement Directorate which is after the Paytm Payments Bank. Reports are doing round in the media that Paytm’s CEO Vijay Shekhar Sharma may be subjected to investigation by the country's financial crime-fighting agency following fresh charges of fund siphoning, according to statements made by Revenue Secretary Sanjay Malhotra to a leading media house. 

However, One97 Communications Ltd (OCL) has denied media reports of an ED investigation. On Wednesday, the Reserve Bank of India (RBI) directed Paytm, the payments bank unit of One97 Communications, to cease accepting new deposits in its accounts or popular wallets from March.

"Categorically deny any investigation by the Enforcement Directorate on OCL, our 

associates and/or its Founder & CEO for anti-money laundering activities

Neither the Company nor its founder and CEO are being investigated by the Enforcement Directorate regarding inter alia money laundering," the company said in a statement. 

Our statement on recent speculative media reports: We deny any investigation by the ED on Paytm, our associates or any executive regarding money laundering https://t.co/s0sab7wJYE

— Paytm (@Paytm) February 4, 2024

Dismissal of Enforcement Directorate Investigation

One97 Communications Ltd (OCL), the parent company of Paytm, has vehemently dismissed recent media reports suggesting that its founder, Vijay Shekhar Sharma, or others associated with the company are currently under investigation by the Enforcement Directorate (ED). Paytm Payments Bank clarified that neither the company nor Vijay Shekhar Sharma is under scrutiny for money laundering.

"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. During any such investigations by the authorities on any set of merchants/users in the past, we have cooperated with them on these investigations. This has been previously disclosed to the stock exchanges. We would like to set the record straight and deny any involvement in anti-money laundering activities. We have and continue to abide by Indian laws and take regulatory orders with utmost seriousness," the Paytm statement added.

Paytm Founder Vijay Shekhar Sharma Assures Job Security Amid Crisis, Collaborates with RBI and Banks for Solutions

Addressing the ongoing Paytm crisis, founder Vijay Shekhar Sharma reassured employees during a virtual town hall that there will be no job layoffs. He emphasised the company's commitment to resolving issues by collaborating with the RBI and forming partnerships with other banks. Sharma stated, "You are a valued member of the Paytm family, and there's no need for concern. Several banks are supporting us in this endeavor."

RBI's Concerns and Paytm's Response

Reports indicate that the Reserve Bank of India (RBI) discovered hundreds of thousands of accounts at Paytm Payments Bank created without proper identification, raising concerns about potential money laundering activities. Paytm, in response, assured that it operates with the highest ethical standards and affirmed that neither the company nor its founder-CEO are subjects of an investigation by the Enforcement Directorate regarding money laundering.

KYC-Related Lapses and Regulatory Compliance

Acknowledging certain merchants and users on its platforms being subject to inquiries, Paytm emphasized its cooperation with the authorities. The company's statement clarified that while facing regulatory scrutiny, it remains committed to abiding by Indian laws and takes regulatory orders seriously. Paytm expressed its intent to set the record straight and disassociate itself from any involvement in anti-money laundering activities.

 RBI's Action and Enforcement Directorate Referral

In response to multiple violations, including the use of the same PAN on multiple occasions, absence of KYC, and allowing transfers without proper verification, the RBI decided to bar Paytm Payments Bank from accepting fresh deposits starting March. The central bank has also referred the matter to the Enforcement Directorate, marking a significant development in the ongoing regulatory challenges faced by the digital payments giant. 

Market Impact and Founder's Response

The regulatory actions have taken a toll on Paytm's market performance, with the company's stock plunging by 36% in the two days following the RBI's move, resulting in a staggering $2 billion loss in market value. Vijay Shekhar Sharma, the founder of Paytm, downplayed the impact during a conference call with analysts, describing the regulatory measures as a "speed bump."

Potential Enforcement Directorate Probe

The latest revelation from Revenue Secretary Sanjay Malhotra adds to the uncertainty surrounding Paytm Payments Bank. Malhotra stated that if there are any fresh charges of money laundering against Paytm by the RBI, the Directorate of Enforcement will investigate in accordance with the law.

As Paytm faces heightened scrutiny from both regulatory bodies and the financial crime-fighting agency, the company's commitment to regulatory compliance and ethical standards remains in focus. The unfolding events underscore the challenges in India's evolving digital financial landscape and the need for financial institutions to adhere to stringent regulatory requirements. Paytm's future trajectory will likely be influenced by the outcomes of the ongoing investigations and its ability to address the concerns raised by regulatory authorities.

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