ED Issues Notice to Paytm Over Alleged FEMA Violations

The Enforcement Directorate (ED) has issued a notice to Paytm over alleged violations of the Foreign Exchange Management Act (FEMA). The investigation focuses on potential non-compliance with India’s fintech regulations, particularly regarding foreign exchange transactions.

Paytm Under Scrutiny for FEMA Violations

The ED has issued a show cause notice to Paytm regarding its acquisition of Little Internet and Nearbuy India (formerly Groupon) between 2015 and 2019, citing alleged violations under FEMA. The notice also extends to Paytm’s parent company, its two subsidiaries, and several current and former directors and officers. 

According to sources, the ED is examining whether Paytm compliance adhered to the regulatory framework outlined in FEMA. The company’s cross-border transactions, including fund transfers and partnerships with foreign entities, have come under scrutiny as part of the probe. The agency is assessing whether the digital payments firm violated any provisions related to capital flows, foreign investments, or remittances.

The notice underscores the government’s increasing vigilance in regulating fintech companies and ensuring compliance with India’s fintech regulations. As digital payment firms expand globally, regulatory bodies are tightening oversight to prevent financial irregularities, money laundering risks, and unauthorized foreign transactions. The ED’s action against Paytm signals a broader effort to enforce FEMA violations and maintain financial transparency.

Paytm’s Response and Compliance Measures

Following the notice, Paytm compliance teams are expected to cooperate with authorities and provide necessary documentation to clarify the company’s position. The firm has reiterated its commitment to following India’s fintech regulations, ensuring adherence to legal frameworks governing foreign transactions and digital payments.

In response to the ED’s notice Paytm stated that there is no financial impact on the company and that it is actively seeking legal counsel to explore appropriate remedies for resolution. Paytm also said that this pertains to a period when these companies were not its subsidiaries.

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