The Delhi High Court has set aside a penalty of INR 96 lakh imposed on online payment major PayPal by the finance ministry’s.
Financial Intelligence Unit-India (FIU) for allegedly violating India’s anti-money laundering law.
Single-judge Justice Yashwant Varma held that actual handling of funds cannot be decisive of whether an entity would fall within the ambit of the definition of 'payment system'.
During the hearing, the court said that PayPal is a ‘payment system operator’ within the framework of Prevention of Money Laundering Act (PMLA). Hence, it is obliged to follow the reporting entity obligations under the PMLA.
As per the court order, PayPal will have to comply with Section 12 of the PMLA. As a ‘reporting entity’, it is mandatory to verify and maintain records of all transactions and identities of all its clients for a period of ten years.
The court contended that the penalty imposed upon PayPal was “clearly unjustified” as PayPal was under the bona fide belief that its operations did not fall within the ambit of the PMLA.
“The Court deems it apposite to emphasise that bearing in mind the objectives underlying the promulgation of PMLA and the activity that it seeks to regulate and penalise, there appears to be no legal justification to interpret Section 2(1)(rb) to embrace only those entities which are directly engaged in the handling, retention or transfer of funds,” the judgment said.
Website designed, developed and maintained by webexy