Global: Paytm Payments Bank Penalized for KYC Shortcomings by Reserve Bank of India

India’s Reserve Bank has imposed a fine of approximately $650,000 on Paytm Payments Bank, citing significant lapses in the “know your customer” (KYC) processes employed by the bank. This penalty comes on the heels of regulatory directives issued last year, instructing Paytm Payments Bank to cease onboarding new customers and to engage an IT audit firm due to “supervisory concerns.”

A recent “special scrutiny” conducted by the Reserve Bank, focusing on the bank’s adherence to KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations, identified several instances of non-compliance with regulatory provisions. Among the key findings:

1. The bank failed to identify the beneficial owners of entities it onboarded for payout services.
2. Inadequate monitoring of payout transactions and a lack of risk profiling for entities availing payout services.
3. Failure to promptly report a cyber incident.
4. A video-based customer identification process that allowed connections from IP addresses located outside of India.

These shortcomings in the KYC processes have led to regulatory action by the Reserve Bank of India, underscoring the importance of robust compliance with these financial regulations.