ED seizes funds worth Rs 107 Cr from Chinese loan application company for FEMA violation
The Enforcement Directorate (ED) said on Thursday it had seized funds worth around Rs 107 crore from a Chinese-controlled NBFC, engaged in providing instant personal loans through an internet app, to alleged violation of foreign exchange law.
The agency said funds from PC Financial Services Private Limited (PCFS), a non-bank financial corporation (NBFC), were in bank accounts and virtual accounts on online payment gateways and these were seized under the provisions of exchange management. Law (FEMA).
The total amount entered is Rs 106.93 crore.
The ED said the case appeared on its radar during an ongoing money laundering investigation against a number of NBFC and FinTech companies linked to instant personal loan mobile apps.
The loans were granted at a high interest rate and recovered by illegally using clients’ personal data and threatening and abusing them through call centers, the agency said in a statement.
The alleged illegalities of these apps were reported in a number of states over the past year, particularly following the economic stress triggered by the lockdown imposed to curb the spread of COVID-19, and a number of people are believed to have been driven to end their own lives. because of the extortion and intimidation of these “dubious” companies.
In the latter case, the NBFC granted such loans through a mobile phone application called “cashbean”.
“PCFS is a 100% subsidiary (WOS) of Oplay Digital Services, SA de CV, Mexico, which in turn is a WOS of Tenspot Pesa Limited, Hong Kong, owned by Opera Limited (Cayman Islands) and Wisdom Connection I Holding Inc. (Cayman Islands), ultimately owned by Chinese national Zhou Yahui.
“The original Indian company, PCFS, was incorporated in 1995 by Indian nationals and obtained the NBFC license in 2002 and after RBI approval in 2018, ownership was transferred to the Chinese-controlled company.” , said the general manager.
The ED investigation found that the foreign parent companies of PCFS brought in foreign direct investment (FDI) worth Rs 173 crore for lending activities and within a short period of time made remittances. overseas funds of Rs 429.29 crore on behalf of payments for the software. services received from related foreign companies.
PCFS also showed high domestic spending of Rs 941 crore, the agency said.
A “detailed” investigation showed that most of the foreign expenses paid by the company were going to foreign companies, which are related and owned by the same Chinese nationals who own the Opera group, he said.
“All the foreign service providers were chosen by the Chinese owners, and the price of the services was also set by them.
“ED discovered that exorbitant payments were blindly authorized by the bogus Indian directors of PCFS, without any due diligence and on the instructions of the country’s chief Zhang Hong, who reported directly to Zhou Yahui, a resident of China,” said the ‘agency.
PCFS handed over currency worth Rs 429 crore to 13 foreign companies located in Hong Kong, China, Taiwan, United States and Singapore as payment of license fees for the “cashbean” application (at Rs 245 crore per year), technical software costs (around Rs 110 crore) and online marketing and advertising costs (around Rs 66 crore), he alleged.
The ED said all of these services and applications are available in India for a “fraction” of the cost incurred by PCFS.
“In addition, all of the NBFC customer base was in India and despite this huge payments were made overseas and no proof of service receipt is there.
“Simultaneously, during the same period, the PCFS also recorded domestic expenses of a similar amount under the same expenditure headings,” he alleged.
The agency alleged that the management of the company “gave no justification” for the expenses and admitted that all remittances were made to move money out of India and park it at the foreigner in the accounts of group companies “controlled” by the Chinese promoter.
Therefore, he accused PCFS of having “illegally” remitted huge funds outside India under the pretext of importing non-existent software and marketing services to park the funds overseas and hold them there. accounts of related foreign companies, resulting in a violation of FEMA.
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