ED raids offices of Paytm, Cashfree, Razorpay in Chinese loan apps probe

Sep 03, 2022 05:54 PM IST

The ED raids in Bengaluru on online payment gateways Paytm, Razorpay and Cashfree began on Friday and continued on Saturday

The offices of online payment gateways Paytm, Razorpay and Cashfree have been raided by the Enforcement Directorate (ED) in connection with its probe into illegal instant smartphone-based loans controlled by Chinese apps.

The ED raids also covered a few entities controlled by Chinese individuals. (Representative Image)
The ED raids also covered a few entities controlled by Chinese individuals. (Representative Image)

Six premises belonging to Paytm, Razorpay and Cashfree, as well as a few entities controlled by Chinese individuals, were covered in the raids in Bengaluru, which began on Friday, the federal anti-money laundering probe agency said in a statement on Friday. The searches continued on Saturday, it said.

Following the raids, 17 crore worth funds kept in merchant IDs and bank accounts of entities controlled by Chinese individuals have been seized by the agency that investigates financial crimes.

The agency initiated a probe under the Prevention of Money Laundering Act (PMLA) after taking over at least 18 first information reports (FIRs) registered by the Cyber Crime Police Station of Bengaluru police against numerous entities and persons.

The persons and entities named in the FIRs are involved in extortion and harassment of the public, who had availed small amount of loans through the mobile apps being run by them, it is alleged.

Investigations have revealed that most of the entities named in the Bengaluru police cases are controlled by Chinese citizens. Their modus operandi, the ED statement said, is “to use forged documents of Indians and make them as dummy directors of those entities” to launder proceeds of crime.

“It has come to notice that the said entities were doing their suspected/illegal business through various merchant IDs/accounts held with payment gateways/banks,” the statement said, adding that premises of Razorpay, Cashfree Payments, Paytm Payment Services and entities controlled or operated by Chinese persons were covered in the search operation.

“During the search operation, it is noticed that the said entities were generating proceeds of crime through various merchant IDs/accounts held with payment gateways/banks and they are also not operating from the addresses given on the ministry of corporate affairs website/registered address and having fake addresses,” ED said.

“Most of these Chinese nationals backed companies were incorporated around Covid-19 outbreak in 2020 with the help of chartered accountants,” said an officer who didn’t want to be named. “The bank or wallet accounts opened by the suspects using KYC (know your customer) documents were used to provide loans to the general public by charging high processing fees or exorbitant interest rates.”

“Later, these loan apps resorted to systematic abuse, harassment and threatening to the defaulters through call centres for coercive recovery of the loans by obtaining sensitive data of the user stored on mobiles, such as contacts and photographs, and using them to defame or blackmail the borrower. They even threatened to send legal notices,” the officer said, detailing the modus operandi.

In at least two dozen cases taken up by ED from Andhra Pradesh, Telangana and Karnataka, the agency suspects that “hundreds of crores have been sent out to India, mainly in South east Asia and Hong Kong, using this modus operandi,” said a second officer, who also requested anonymity. In a couple of cases, crypto currencies were used by the fraudsters to send money abroad.

The detailed reports have been sent to the central government and the Reserve Bank of India (RBI) about the illegal activities of the Chinese loan apps, the second officer said.

Union home minister Amit Shah is learnt to have chaired at least three meetings on the subject since last year, in which he asked ED, other agencies and regulatory bodies to keep an eye on inward and outward movement of Chinese funds through the apps.

“A few of our merchants were being investigated by law enforcement about a year and a half back. As part of the ongoing investigation, the authorities requested additional information to help with the investigation,” a Razorpay spokesperson said. “We have fully cooperated and shared KYC and other details. The authorities were satisfied by our due diligence process.”

“We extended our diligent co-operation to the ED operations, providing them the required and necessary information on the same day of enquiry,” said a spokesperson of Cashfree Payments. “Our operations and on-boarding processes adhere to the PMLA and KYC directions, and we will continue to do so in the time to follow.”

HT has reached out to Paytm and the story will be updated with their comments.

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