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PayPal Registers with India’s Financial Intelligence Unit

FIU-IND issued an order directing PayPal to register itself as a “reporting entity,” and consequently imposed a penalty of Rs 96 lakhs on the payments company for failure to do so.

Payment gateway platform PayPal has registered with the Finance Ministry's Financial Intelligence Unit- India (FIU- IND), according to a report by Inc42. The FIU-IND is a government organization that collects financial intelligence about offenses under the Prevention of Money Laundering Act (PMLA), 2002. PayPal has also appointed a principal officer to communicate with the FIU, as required by PMLA. Why it matters: This registration means that PayPal would now have to report large or suspicious transactions carried out using its platform to FIU-IND, have a more stringent customer verification system in place, and maintain detailed records of users and transactions for a specified duration, among other obligations. PayPal's registration with the authority also signals that other fintech companies that provide payment technology might be asked to do the same, thereby increasing compliance burdens for the sector as a whole. Some context: In 2020, FIU-IND issued an order directing PayPal to register itself as a “reporting entity,” and consequently imposed a penalty of Rs 96 lakhs on the payments company for failure to do so. PayPal appealed against this penalty at the Delhi High Court arguing that it did not have to register itself as a “reporting entity” with the FIU-IND as it is not a “payment system operator” as defined under PMLA, 2002. PayPal argued it merely facilitated transactions without handling funds directly, positioning itself as a payment gateway rather than a payment system operator. It pointed out that the banks and authorized dealers of foreign exchange, who actually engage in…

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