ED raids Paytm, Razorpay, Cashfree in Chinese Loan App case
The Enforcement Directorate (ED) searched the offices of fintech companies Paytm, Razorpay, and Cashfree as part of an ongoing probe into fraudulent 'Chinese Loan App' case. The investigation is in connection with 18 first information reports (FIRs) registered with the Cyber Crime Police Station, Bengaluru against entities involved in extortion and harassment of the public. The ED seized Rs. 17 crore during the raids.
- India's fintech market is reportedly expected to reach $1 trillion by 2030. Digital lending will play an important part in this growth. However, with opportunity comes rogue elements and inefficiencies.
- The Chinese Loan App case is a proof of that. With RBI's digital lending guidelines set to be implemented by November 30, we may see a change in this.
The ED raided six premises of Paytm, Razorpay, and Cashfree in Bengaluru. The searches were conducted under the provisions of the Prevention of Money Laundering Act (PMLA), 2002. The agency also searched premises controlled/operated by Chinese persons. The raid was conducted because it came to ED's notice that the unauthorized loan apps allegedly conducted transactions through the three payment gateways.
ED is investigating 18 FIRs registered by the Cyber Crime Police Station in Bengaluru against several persons and entities. These entities are accused of predatory lending practices. They extorted and harassed people who availed small loans through mobile apps run by those entities. During the investigation, it was found that the companies are controlled or operated by Chinese nationals.
According to ED, these entities generated proceeds of crime by forging documents of Indians and making them dummy directors to escape regulatory mechanisms. During the investigation, the agency noticed that the said entities conducted their business and laundered money through various merchant IDs or accounts held with banks or payment gateways. ED also said there were discrepancies in addresses given on MCA website.
Regarding the raid, Razorpay said, "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." "We are supporting law enforcement agencies, who are investigating a specific set of merchants," said Paytm.
Most of the entities that are being investigated by ED were incorporated around the COVID-19 outbreak. They used bank or wallet accounts opened using KYC to provide loans with either high processing fees or interest rates. They then abused, harassed, and threatened defaulters. They also blackmailed using sensitive data obtained from defaulters' phones and even threatened to send a legal notice.