“As more and more sectors are brought under the ambit of being a reporting entity, it is likely to increase costs due to compliance burden on these entities as they need to take further accountability as a reporting entity,” said Bhalla.ĭon’t miss out on ET Prime stories! Get your daily dose of business updates on WhatsApp. Mumtaz Bhalla, partner at law firm Economic Law Practice, said a lot of other sectors like ecommerce will be brought under PML guidelines eventually. “The PML Act is very stringent, so in my opinion it is better to take a conservative reading on such compliance issues if you are a payment company and start reporting transactions anyway,” said Maheshwari. Any suspicious payment transaction will need to be reported to the Financial Intelligence Unit under the finance ministry. They have to do stricter KYC checks and also build strong reporting standards. This judgement also means that payment companies will have to set up their own compliance and monitoring teams. “PayPal’s stand was that they operate just as a layer on top of banks, just as a facilitator of payments, but the court said that even if you enable payments, you have to abide by the PML guidelines,” said Amit Maheshwari, partner at tax and consulting firm AKM Global. Hence, the company took a stance that it did not need to abide by the PML guidelines. Shares of the online payments system operator were trading 5.74 percent lower at 84. PayPal stock tumbled Monday after reports circulated that the company’s updated acceptable use policy would fine users 2,500 for spreading misinformation. One of the executives cited earlier pointed out that PayPal operates only as an international remittance player in India it is not registered as a payment system operator under the RBI. PayPal Stock Plummets after Controversy over ‘Misinformation’ Fine. The RBI in its PA/PG guidelines said anti-money-laundering, combating financial terrorism and know-your-customer guidelines will be applicable to these entities. Large payment players like Razorpay, Cashfree, PhonePe and Pine Labs have received in-principle approval from the Reserve Bank of India to operate as payment aggregator. Many others were not sure if they needed to, this judgement brings clarity,” said another executive. “The central bank mandated PA and PGs (payment aggregators and payment gateways) to be compliant with PML Act 2002, so those companies who have received in-principle approval would have already set it up. However, most of the players have received only in-principle approval as of now to operate as payment aggregators. Payment applications which are in the process of becoming payment aggregators or payment gateways have already started reporting suspicious transactions to the ministry, as guided by the newly formed regulations. “Many large payment companies were already reporting to the Financial Intelligence Unit under the finance ministry, but they were doing it to be on the right side of the law as of now there was no mandate to do so,” one of the executives said on the condition of anonymity. With payments being a low-margin business, such issues will make many small businesses unviable and also spoil user experience, industry executives said. Given banks and payment companies undertake their own KYC checks, to mandate even technology service providers to do the same will increase cost of compliance. Additionally, transfer of funds supports more than 100 currencies globally.Additionally, this San Jose, CA-based company is gaining from strategic acquisitions including Hyperwallet, Braintree and iZettle that are helping it in delivering better payment experience.Another senior legal counsel told ET that such a judgement is a bit far fetched. Further, the company supports withdrawal of funds from bank accounts in 56 currencies and holding balances in PayPal accounts in 25 currencies. It has connections with financial service providers worldwide. PayPal allows customers to send payments in more than 200 markets globally. The company offers domestic and international person-to-person payment facilities with the help of PayPal and Xoom products. The company's peer-to-peer payment service, Venmo, is the key catalyst behind the solid growth in its total payment volume. PayPal is one of the largest online payment solutions providers that enables it to offer smooth and secure transaction facility to both customers and merchants.
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