The Directorate of Enforcement (ED) has launched an extensive investigation into Paytm since 2021, uncovering potential connections to money laundering and illicit betting, according to informed sources. Economic Times reported that Revenue Secretary Sanjay Malhotra announced on Saturday that the ED would delve deeper into Paytm Payments Bank if new allegations of fund siphoning emerge.
The ED, alongside the Directorate of GST Intelligence (DGGI), has raised concerns with the government about the exploitation of Indian payment gateways for trade-based money laundering (TBML), illegal betting, and the channelling of funds to crypto wallets. Notably, Paytm transactions have come under scrutiny, including those related to cryptocurrency mining investments.
The Reserve Bank of India (RBI) took regulatory action on January 31, directing Paytm Payments Bank to cease basic payment services across various platforms, including the Unified Payments Interface (UPI), due to regulatory non-compliance. Additionally, the RBI prohibited the bank from providing banking services, such as accepting deposits and processing payments.
Despite the ED not formally charging Paytm in money laundering cases, the company has faced office searches, document requests, frozen merchant accounts, and executive interrogations related to investigations into 365 fintech companies linked to Chinese nationals. Recent attention has also focused on Paytm transactions in the Mahadev Online Book illegal betting case, where the accused orchestrated an illicit betting scam exceeding Rs 5,500 crore. In this case, Paytm emerged as one of the payment gateways employed by the accused to conduct transactions with clients involved in the betting operations. The ED found that the bets were exclusively accepted through the Unified Payments Interface (UPI) to project a more credible image. Fake UPI accounts were created through fraudulent Know Your Customer (KYC) processes or enticement-based commissions, with over eight lakh such fake accounts identified by the investigative panel.
Paytm has denied ED scrutiny over money laundering, distancing founder Vijay Shekhar Sharma and parent company One 97 Communications Ltd (OCL) from any investigation. Paytm insists that it has not been the subject of an ED investigation, although occasional inquiries involving merchants on its platforms have been addressed with full cooperation.
As Paytm faces increased scrutiny, regulatory authorities are stressing the need for robust internal systems and compliance with guidelines to prevent misuse of payment gateways. With the Reserve Bank of India (RBI) ordering Paytm Payments Bank to cease various banking services due to persistent non-compliance, Paytm finds itself at the centre of a complex web of investigations, requiring thorough examination to address the allegations and concerns raised by regulatory bodies.