Financial Probe Agencies’ Officials Hail HC’s PayPal Ruling, Call It Beneficial for FATF Review

The ruling passed on July 24, declared the American online payment platform PayPal as a ‘reporting entity’ under the anti-money laundering law

Financial investigators hailed the Delhi High Court ruling on PayPal. The ruling passed on July 24, declared the American online payment platform PayPal as a ‘reporting entity’ under the anti-money laundering law. The investigators believe this ruling will help strengthen India’s effort to show that it has a healthy financial system. 

Justice Yashwant Verma in his ruling last week stated that the American company was liable to be viewed as a payment system operator under the Prevention of Money Laundering Act (PMLA). The court although, cancelled the Rs 96 lakh penalty imposed on PayPal by the Financial Intelligence Unit (FIU) in December 2020.

Currently, the Indian financial system and its anti-money laundering systems are under the review of the Financial Action Task Force (FATF). With its headquarters in Paris, the FATF is a global body that leads investigations against money laundering and terrorist financing crimes. The FATF team is expected to arrive in India in November, reported PTI. 

Officials in financial law enforcement agencies believe the categorisation of PayPal as a 'reporting entity' will help ensure regulatory compliance from all such big payment platforms. This will also ensure that all these gateways share the stipulated suspicious transaction reports (STRs) and cross-wire transfer reports with the FIU under the PMLA, the report noted. 

The FIU looks into these reports as per its authority and tasks them to various probe agencies which look into money laundering, tax evasion and other serious financial frauds. 

PTI reported an anonymous senior officer stating that these payment gateways and system operators facilitate transactions worth large amounts of money and it is very important to know the details of such transactions. 

Although the judgement is not expected to add any bonus points for India’s review by the FATF, it indicates the seriousness and dedication of the anti-money laundering agencies in the country in ensuring the economic channels in India are clean and minimising the risk of financial crimes, the officials expressed. 

Commenting on the FIU’s investigation into PayPal, the court noted in its order, “The grievance of the FIU-IND essentially is, and in its own words, described to be that of an impaired visibility with respect to transactions which are completed on PayPal's platform.”