India’s Financial Intelligence Unit (FIU) recently passed an order under the country’s Prevention of Money Laundering Act, 2002 (PMLA), penalizing PayPal for failing to fulfill its obligations under the Act.
The PMLA requires all reporting entities to maintain records of specified transactions and provide necessary information about such transactions to FIU-India. The transactions specified for this obligation include cross border wire transactions, cash transactions, suspicious transactions, counterfeit currency transactions etc. FIU-India has maintained that PayPal is also a financial institution under the provisions of the PMLA, under which all entities that operate payment systems in India are reporting entities.
FIU-India had issued a show-cause notice to PayPal in September 2019 in relation to its failure to fulfill its obligations despite being a reporting entity due to its activities as a financial institution and payment system operator. Particularly, the notice asked PayPal to show cause for non-compliance with the obligations of registering itself as a reporting entity with FIU-India and communicating to the authority identifying information about the Designated Director and the Principal Officer.
On account of these three non-compliance incidents, FIU-India has levied a fine of ₹3.2 million (over $43k) for each failure, ₹1,00,000 for each month of violation during the 32-month period from March 16, 2018 when PayPal was first asked to register itself with FIU-India. This amounts to a total penalty of ₹9.6 million ($130k).