Paytm Payments Bank Fined by RBI for KYC Failures

Published about 2 months ago

The Reserve Bank of India (RBI) has imposed a fine of approximately $650,000 on Paytm Payments Bank for shortcomings in its Know Your Customer (KYC) procedures.

Suspension of New Customer Onboarding

In the previous year, the RBI directed Paytm Payments Bank to halt the onboarding of new customers. This decision was taken due to “supervisory concerns”, and the bank was also required to appoint an IT audit firm.

RBI’s Special Scrutiny Discovers Non-compliance

Following “special scrutiny” from a KYC/AML perspective, the RBI discovered that Paytm Payments Bank was non-compliant with specific elements of its regulations. Specifically, the bank did not identify beneficial owners of entities it had onboarded to provide payout services. Additionally, the bank did not monitor payout transactions, nor did it carry out risk profiling of entities availing payout services.

Delayed Reporting of Cyber Incident

Paytm Payments Bank was also found to have failed to promptly report a cyber incident. Furthermore, the bank’s video-based customer identification process allowed connections from IP addresses located outside India, which is another violation of RBI’s guidelines.

This incident underscores the importance of stringent KYC procedures and cyber incident reporting for all financial institutions. It serves as a reminder of the need for continuous compliance with all relevant regulations to ensure the security and integrity of financial transactions.

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