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Chinese Loan App PMLA Case: ED Raids Premises of Razorpay, Paytm, Cashfree

The federal probe agency also said that during the raids, it seized Rs 17 crore worth of funds kept in "merchant IDs and bank accounts of these Chinese persons-controlled entities".
Illustration: The Wire.

New Delhi/Bengaluru: The Enforcement Directorate (ED) on Saturday, September 3 said it conducted raids at the premises of online payment gateways such as Razorpay, Paytm and Cashfree in Bengaluru as part of a money laundering case against some instant app-based loan dishing entities “controlled” by Chinese persons.

The searches that started Friday as part of an ongoing probe are still underway, the agency said Saturday evening.

The federal probe agency also said that during the raids, it seized Rs 17 crore worth of funds kept in “merchant IDs and bank accounts of these Chinese persons-controlled entities”.

The three companies responded by saying they were cooperating with the federal agency.

A Paytm spokesperson said they were “supporting law enforcement agencies, who are investigating a specific set of merchants.”

“The authorities reached out to us with directions to provide certain information about these merchants under scrutiny, to which we promptly responded. We continue to cooperate with the authorities and remain fully compliant,” Paytm said.

Razorpay said some of their 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 have fully cooperated and shared KYC and other details. The authorities were satisfied by our due diligence process,” the spokesperson said.

Also read: ED Raids on Vivo: China Says It Hopes for a ‘Truly Fair’ Probe in Accordance With Law

Cashfree Payments said their “operations and onboarding processes adhere to the PMLA and KYC directions, and we will continue to do so.”

“We extended our diligent co-operation to the ED operations, providing them the required and necessary information on the same day of enquiry,” the spokesperson added.

These payment gateway firms have been in the crosshairs of the ED action since 2020 soon after the COVID-19 pandemic broke in the country.

The ED initiated a probe under the criminal sections of the Prevention of Money Laundering Act (PMLA) after a number of instances of gullible debtors ending their lives came to the fore from various states.

The police had stated the victims were being coerced and harassed by loan app (application) companies by publicising their personal details available on their phones and by undertaking high-handed methods to threaten them.

It was alleged that the companies sourced all personal data of the loan-taker at the time of downloading of these apps on their phones, even as their interest rates were “usurious”.

The agency had said the alleged proceeds of crime in the case were routed through these payment gateways.

Talking about the instant case, the ED said the “modus operandi” of these entities was that they use forged documents of Indians and made them dummy directors leading to the generation of “proceeds of crime”.

“These entities are controlled/operated by Chinese persons.

“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 ED said.

It said the “premises of Razorpay Pvt Ltd, Cashfree Payments, Paytm Payment Services Ltd and entities controlled/operated by Chinese persons are covered in the search operation”.

The entities under investigation 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 MCA (ministry of corporate affairs) website/registered address, the agency said.

The ED probe found these companies had “fake” addresses.

The ED said this money laundering case was based on at least 18 FIRs filed by the Bengaluru Police cyber crime station against “numerous entities/persons in connection with their involvement in extortion and harassment of the public who had availed small amount of loans through the mobile apps being run by those entities/persons.”


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