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Delhi High Court Stays Order Of Rs. 96 lakh Penalty Imposed By Financial Intelligence Unit To PAYPAL, Notice Issued To RBI

Shreya Agarwal
13 Jan 2021 4:27 AM GMT
PMLA Pay Pal

Directing PayPal to maintain a record of all its transactions, Delhi High Court on Tuesday granted stay on a plea by the payment gateway challenging the imposition of Rs. 96 lakh as penalty on it, for alleged violation of India's money laundering law. The relief is subject to the deposit of Rs. 96 lakh bank guarantee by PayPal before the court within a period of 2 weeks.

Justice Pratibha Singh
issued notice on the plea by PayPal and and directed the Financial Intelligence Unit (FIU) to file its response on the matter by Feb 26. RBI has also been added as a party in the case.
The plea concerns itself with issues regarding the inclusion of PayPal as a reporting agency under the Prevention of Money Laundering Act, and directs RBI and the Finance Ministry to take a policy decision on the issue after the deliberation over the same by a committee of its representatives.
PayPal has argued that as a payment intermediary it has been wrongly included within the definition of a reporting entity by FIU, and that such inclusion is against the spirit and letter of the existing provisions of the Prevention of Money Laundering Act (PMLA). It has been submitted that PayPal's inclusion as a reporting agency under the PMLA is only possible through an amendment of the law by the legislature.
The regulation and supervision of payment systems in India is governed by the Payment and Settlement Systems (PSS) Act, 2007, however, PayPal has not been treated as a payment system operator under the PSS Act by the RBI.
A plea against the operations of PayPal was also filed last year, by one Abhjiit Mishra before the Delhi High Court, alleging that the operations of PayPal as a payment system in India is against Section 4(1) of the PSS Act, 2007.
Section 4(1) of the PSS Act, 2007, provides that "no person other than the Reserve Bank shall commence or operate a payment system except under and in accordance with an authorization issued by the Reserve Bank under the provisions of the Act."

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