American online payment gateway PayPal filed suit in the Delhi High Court on Wednesday against an order ruling that PayPal is a “payment system operator” under the Prevention of Money Laundering Act (PMLA) and therefore must comply with its “reporting obligations” under the Act. “.

PayPal’s top lawyers argued before a bench headed by Chief Justice Satish Chandra Sharma that the order passed by a high court judge was “wrong”.

Senior defense counsel Mukul Rohatgi, who represented the appellant, also said that the single judge’s order cannot be upheld in light of the recent High Court ruling on the payment system operator issue.

The bench, made up of Justice Sanjeev Narula, listed the appeal for a further hearing in September.

On July 24, a judge quashed the Rs 9.6 crore fine imposed by India’s Financial Intelligence Unit (FIU) on PayPal for allegedly failing to comply with its “reporting obligations” under the Anti-Money Laundering Act.

It also ruled that PayPal risked being considered a “payment system operator” under the PMLA and therefore must comply with its “reporting obligations.”

The single judge’s order comes after PayPal filed a petition challenging the penalties imposed on it by the FIU.

On 17 December 2020, the FIU directed the company to pay the fine within 45 days, to register with the FIU as a reporting entity on the grounds that it is a “payment system operator”, to appoint a principal officer and director to communicate within time. Two weeks after receiving the order.

Reporting entities are required by law to report to the authorities any foreign exchange financial transactions that occur on their systems.

Financial Intelligence Unit (FIU) – India is an organization under the Ministry of Revenue, Government of India, which collects financial intelligence on offenses under the Prevention of Money Laundering Act, 2002.

The judge said the PMLA is not just a criminal statute, but is designed to detect and prevent fraud and suspicious transactions, and its beneficial goals must be kept in mind when trying to clarify the intent and scope of its various provisions.

In its December 2020 order, India’s FIU accused PayPal of violating the PMLA and “concealing” suspicious financial transactions and abetting the “disruption” of the Indian financial system.

According to the order, the legal battle began in March 2018 when the FIU required PayPal to register as a reporting entity to keep “records” of all transactions, report suspicious transactions and cross-border wire transfers to the FIU, and identify those funds. beneficiaries.

In September 2019, PayPal issued a notice of cause to the FIU in response to an order issued under Section 13 of the PMLA in response to the refusal of the FIU’s instruction.

PayPal defended its actions, citing RBI guidelines stating that it operates only as an Online Payment Gateway Service Provider (OPGSP) or payment intermediary in India and “does not fall within the definition of a payment system operator or financial institution.” scope”. agency and thus fall outside the definition of a PMLA reporting entity”.

“Therefore, payment intermediaries such as PayPal are not currently required to register with FIU,” India’s FIU said in a reply to the agency.

However, the FIU rejected its claims and said that PayPal, which is heavily involved in the processing of funds in India, is a “financial institution” and thus eligible as a reporting entity under the PMLA.

The FIU order also said that while the company “flipped” Indian procedures, its U.S. parent company, PayPal Inc, reported suspicious transactions to the U.S. FIU, as well as similar agencies in Australia and Britain.


(This story was not edited by NDTV staff and was automatically generated from syndicated feeds.)

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