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Chinese loan app case: ED searches Paytm, Razorpay, and Cashfree offices in Bengaluru

by Babu Patil
Chinese loan app case ED searches Paytm, Razorpay, and Cashfree offices in Bengaluru

On Saturday, the Enforcement Directorate announced that it had raided the offices of six different online payment gateways in Bengaluru, including Razorpay, Paytm, and Cashfree, due to allegations of illegal activity involving fast app-based loans “managed” by Chinese nationals.

The agency said tonight that the searches that began on Friday as part of the continuing investigation are still going on.

During the raids, the federal investigation agency claimed to have confiscated Rs 17 crore from “merchant IDs and bank accounts of these Chinese persons-controlled organisations.”

Although Paytm declined to comment, Razorpay and Cashfree said they were working with the government agency.

About a year and a half ago, police enforcement was looking into some of our sellers.
A representative for Razorpay said that authorities have asked for further information as part of the continuing inquiry.

We have been completely cooperative in terms of providing Know Your Customer information and other relevant data. Our investigation into the matter was thorough enough to satisfy the authorities.”operations and on-boarding processes correspond to the PMLA and KYC directions, and we will continue to do so,” Cashfree Payments added.

“We extended our careful co-operation to the ED operations, supplying them with the relevant and necessary information on the same day of enquiry,” the statement continued.

Since early 2020, when the COVID-19 epidemic first emerged in the country, these payment gateway businesses have been a target of ED action.

The Enforcement Division opened an investigation under the criminal provisions of the Prevention of Money Laundering Act (PMLA) after reports of naive debtors taking their own lives surfaced in multiple states, with local law enforcement claiming that these individuals were being coerced and harassed by these loan app (application) companies, who made public their personal details available in their phones and used high-handed methods to threaten them.

Despite charging “usurious” interest rates, it was claimed that the corporations obtained all of the borrower’s personal information at the time the apps were downloaded on their smartphones.

The ED stated that the “modus operandi” of the businesses involved in this case was to use fake documents of Indians and make them dummy directors in order to generate “proceeds of crime.”

“Chinese nationals run/control these organisations.”

The ED claimed that “it has come to notice that the aforementioned firms were performing their suspected/illegal activity using numerous merchant IDs/accounts held with payment gateways/banks.”

According to the document, “the search operation includes the premises of Razorpay Pvt Ltd, Cashfree Payments, Paytm Payment Services Ltd, and organisations controlled/operated by Chinese people.”

In addition to not operating from the addresses listed on the MCA (minister of corporate affairs) website/registered address, the businesses under investigation were producing proceeds of crime through multiple merchant IDs/accounts held with payment gateways/banks, according to the agency.

According to the ED investigation, these businesses used fictitious locations.

At least 18 First Information Reports were filed by the Bengaluru Police cyber crime station, according to the ED, accusing “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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