Case of the Chinese loan application: ED searches the premises of Paytm, Razorpay, Cashfree

The Law Enforcement Directorate raided six premises in Bangalore including Razorpay Pvt Ltd, Cashfree Payments and Paytm Payment Services Ltd following allegations that people were defrauded after taking out loans through apps controlled by Chinese nationals.

The searches, which began the day before, continued until Saturday, gathering evidence of proceeds of crime under the Prevention of Money Laundering Act 2002 (PMLA). An amount of ₹17 crore was seized from merchant IDs and bank accounts of entities controlled by the suspected Chinese nationals, the ED said on Saturday.

During investigations, the ED said, it emerged that these entities are either controlled or operated by Chinese nationals. Chinese companies have reportedly developed mobile money-lending apps, including Krazy Rupees and Cash Master, and struck deals with non-banking financial institutions. Companies would offer loans at exorbitant rates and charge disproportionate processing fees for giving loans to gullible people.

Companies are reacting

Commenting on the development, a Razorpay spokesperson said a few Chinese lenders were under investigation by law enforcement about a year and a half ago. “As part of the ongoing investigation, the authorities have requested additional information to facilitate the investigation. We fully cooperated and shared KYC and other details. The authorities were satisfied with our due diligence process,” the spokesperson added.

A spokesperson for Cashfree Payments said: “We have extended our diligent cooperation to ED operations, providing them with the required and necessary information on the same day of the investigation. Our operations and onboarding processes adhere to PMLA and KYC guidelines, and will continue to do so.

The Paytm spokesperson said, “We support law enforcement, who are investigating a specific set of merchants. The authorities asked us to provide certain information about these traders under surveillance, to which we quickly responded. We continue to cooperate with the authorities and remain fully compliant. »

Illegal means

The modus operandi adopted by these Chinese nationals was to use false documents of Indians and make them dummy directors of entities. They were generating money through illegal means, attracting the provisions of the PMLA. “The said entities were found to be doing their suspicious/illegal activities through various merchant IDs/accounts held with payment gateways/banks. The premises of Razorpay Pvt Ltd, Cashfree Payments, Paytm Payment Services Ltd and entities controlled/operated by Chinese people are covered by the search operation,” ED said in a statement.

During research operations, the entities were found to generate proceeds of crime through various merchant IDs/accounts held with payment gateways and banks. They were also not operating from the addresses given on the MCA’s website/registered address, the ED informed. Detectives suspect the addresses are fake.

The ED had taken the case to the Bengaluru Cybercrime Police Station, which had registered 18 FIRs last year against several individuals and businesses to investigate charges that people were cheated after availing small loans through Chinese-run mobile apps. Bengaluru police had also arrested a few people involved in the case.

Published on

September 03, 2022

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