PayPal challenges Delhi HC order declaring it ‘payment systems operator' under PMLA

PayPal Delhi HC

PayPal on August 23 moved a Delhi High Court division bench against an order that said the American online payments player was a payment system operator under the Prevention of Money Laundering Act (PMLA) and had to report suspicious foreign exchange transactions.

A bench led by Chief Justice Satish Chandra Sharma heard the company and asked the Centre's lawyers to obtain instructions in this regard. The case will next be heard on September 5.

In July 2023, a single judge bench of the high court set aside a penalty of Rs 96 lakh imposed on PayPal by the Financial Intelligence Unit-India for alleged non-compliance with the reporting obligations under the money-laundering act.

Justice Yashwant Varma, however, said PayPal was liable to be viewed as a payment system operator under PMLA and will have to comply with reporting obligations.

In its 174-page order, the court rejected the penalty imposed on PayPal, saying it was "clearly unjustified" as PayPal believed its operations were not covered under PMLA.

"The court holds that PayPal is liable to be viewed as a "payment system operator" and consequently obliged to comply with reporting entity obligations as placed under the PMLA. The imposition of penalty in terms of the impugned order dated 17 December 2020 is, however and for reasons aforenoted, quashed," the court said.

The court's order came on a petition by PayPal challenging the Rs 96 lakh penalty imposed on it by the FIU for alleged violation of the PMLA.

The FIU had on December 17, 2020 directed the company to pay the fine within 45 days, register as a reporting entity and appoint a principal officer and director for communication within a fortnight of the order.