Correct Answer : PayPal
The legal battle between PayPal and the FIU commenced in March 2018 when the latter demanded registration as a reporting entity under the PMLA. Despite PayPal’s resistance, the FIU imposed a penalty in December 2020, alleging non-cooperation and failure to comply with anti-money laundering obligations. This penalty was initially overturned in July 2023, but the court ruled that PayPal must adhere to reporting obligations under the PMLA as a payments system operator.
Registration with FIU-IND: What it Means
* Compliance Mandates : PayPal must now report large or suspicious transactions to FIU-IND and implement stringent customer verification procedures.
* Record Maintenance : Detailed records of users and transactions must be maintained for a specified duration.
* Sector-wide Implications : Other fintech firms may face similar registration requirements, increasing compliance burdens across the sector.
Legal Developments and Appeals
* Initial Penalty : FIU imposed a penalty in December 2020, citing non-cooperation and violation of PMLA obligations.
* Court Ruling : While the penalty was overturned, the court upheld PayPal’s obligation as a payments system operator under the PMLA.
* Ongoing Appeal : PayPal appealed the ruling, contesting its classification as a payments system operator and challenging the interpretation of
“payment system” under the PMLA.
FIU Directive and PayPal’s Defense
* FIU Directive : The FIU demanded registration, citing the necessity to combat money laundering and protect India’s financial system.
* PayPal’s Defense : PayPal argued against registration, citing RBI guidelines and positioning itself as an
Online Payment Gateway Service Provider (OPGSP), not a payments system operator.
