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The Reserve Bank of India’s (RBI) January 31 motion directing Paytm Payments Bank Ltd. (PPBL) to stop all new enterprise transactions by February 29 and settle all pipeline transactions by March 15, was triggered by main irregularities within the bank’s compliance with Know Your Customer (KYC) norms, thus exposing clients, depositors and pockets holders to critical danger, in accordance to folks conscious of the developments.
RBI supervisors and exterior auditors are learnt to have discovered: KYC particulars lacking for a really massive variety of clients (operating into lakhs); PAN validation failures in lakhs of accounts; a single PAN used for a number of clients (in hundreds of circumstances, the identical PAN was linked to greater than 100 clients and in some circumstances to greater than 1,000 clients), the folks, who spoke on situation of anonymity said.
The bank was additionally discovered to be concerned in facilitating transactions operating into crores of rupees and nicely past regulatory limits in pay as you go devices with minimal KYC necessities, elevating money laundering concerns, in accordance to these folks.
An unusually excessive variety of dormant accounts had additionally been discovered to have been used as ‘mule accounts’ to facilitate transactions.
When contacted, a Paytm Payments Bank spokesperson said: “The recent direction from RBI is a part of the ongoing supervisory engagement and compliance process. The bank always upheld compliance with supervisory instructions in its interactions with regulator from time to time.”
“We therefore request you to be guided by the press release of RBI dated January 31 and refrain from any further speculation,” the spokesperson added.
The concerns relating to money laundering on the Paytm unit additionally arose from deficiencies within the KYC processes and lack of transaction monitoring system on the bank. In lakhs of circumstances, accounts and wallets had been frozen by varied Law Enforcement Authorities throughout the nation, as a result of such accounts have been used for committing digital frauds, the folks within the know asserted.
“The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action,” the RBI had said in its January 31 assertion, asserting the motion in opposition to Paytm Payments Bank.
The funds bank is accused of not adhering to the ‘arm’s size coverage’ whereas coping with the Promoter Group Entities. Its monetary and non-financial enterprise have been co-mingled with its promoter group firms in violation of licensing circumstances and RBI instructions on the matter, the folks contended.
Auditors discovered that the bank’s dependence on the IT infrastructure of OCL (One97 Communications Ltd. – Paytm’s listed guardian entity) remained absolute and there was no operational segregation. Many transactions have been routed by way of the parent-entity owned apps, elevating critical concerns on information privateness and information sharing.
On a number of events, compliance particulars submitted by the bank have been discovered to be false upon verification, each by RBI supervisors in addition to exterior auditors, the folks added.
The bank additionally allegedly didn’t disclose vital intra-group transactions and associated occasion transactions. Its payables to OCL have been substantial, which weren’t disclosed within the monetary statements of the bank. Further, agreements have been being usually revised to profit OCL or its group firms, which was detrimental to the bank and its clients, the folks asserted.
