SUMMARY
In total, search operations were conducted at five premises after specific inputs from Bengaluru city ‘s central crime branch
Total seizure in the illegal Chinese loan apps case now stands at INR 95 Cr: ED
The case involved Chinese entities that would forge documents of Indians to set up dummy companies, which would then be used to launder money
As part of its ongoing probe into illegal Chinese loan apps, the Enforcement Directorate (ED) on Wednesday (October 19) carried out search operations at five premises across Bengaluru, including that of fintech major Razorpay.
The search operations were conducted after receiving specific inputs from Bengaluru city ‘s central crime branch.
“Based on the investigation conducted and inputs received from the Central Crime Branch, Bengaluru city, the search operation was carried out in this case. The premises of Razorpay and the Bank’s compliance offices related to these entities were covered in the search operation,” the agency said in a release.
An amount of INR 78 Cr, parked with payment gateways and in the bank accounts of the accused, was seized by the agency. This brings the total seizure in this case to INR 95 Cr.
Further probe into the matter is currently underway.
Responding to this, a Razorpay spokesperson said, “We would like to clarify that this recent visit by ED is as part of the ongoing investigation against a few suspicious entities who conducted illegal business through multiple payment gateways/banks, we proactively blocked all those suspicious entities and funds associated with them about 1.5 years ago, and we have shared their details with ED multiple times. Being a regulated financial institution we routinely cooperate with law enforcement agencies and provide necessary merchant information to assist in the investigation process. No funds of Razorpay were frozen as part of these visits. We would like to reiterate that all our operations and onboarding processes adhere to the highest standards of governance & regulatory guidelines.”
The case involves unauthorised lending apps operated by Chinese nationals in the country. The Chinese entities in question forged the KYC documents of unsuspecting Indian nationals and used it to appoint these Indians as dummy directors of firms.
Subsequently, these entities were used to generate and route the proceeds of crime. The ED also noted that a large number of these firms were conducting their illegal businesses via various merchant IDs and accounts held with multiple payment gateways and banks.
“During the search operation, it was noticed that the said entities were generating proceeds of crime through various Merchant IDs/Accounts held with Payment Gateways/banks and they have submitted fake addresses in KYC documents,” the ED said.
The incident came to light after many victims approached Bengaluru Police with complaints of harassment by digital loan sharks. Many of these victims were being regularly threatened and harassed by the local operators of the lending apps, demanding high interest rates.
Subsequently, the cyber crime cell of the Bengaluru Police registered as many as 18 FIRs against numerous persons and entities for their alleged involvement in extortion and harassment of the public.
This is not the first time that the ED has landed on the doors of Razorpay, In the past too the fintech giant was probed and searched over a case involving illegal Chinese loan apps. It was immediately not clear whether the October 19 raids were related to the previous search operations conducted last month.
Illegal Loan Sharks: A Menace
The action by the agency comes as a barrage of cases continue to be reported from across the country involving predatory practices employed by the illegal Chinese loan apps. Days ago, a 23-year old techie from Chennai died by suicide after allegedly being harassed by digital loan operators over a sum of INR 33,000. According to the family, he had already cleared his dues but was still being harassed.
Reports continue to pour from cities, small and metro, of suicides and deaths after threats from these digital loan sharks. Despite having no mandate to operate in the country, many of these firms openly flout norms and continue to offer their services.
While the apps have largely stayed under the radar of authorities, the Reserve Bank of India (RBI) has also been collaborating with Google to delist such apps from app marketplaces. Despite the announcement that only ‘white listed’ loans apps will be allowed on Play Store, the actual deployment is yet to see the light of the day.
Warnings from the RBI about conducting due diligence before availing such services have also gone unheeded as these apps provide a quick fix for users looking to avail small-ticket loans. The eventual consequences have, however, proved dastardly for many people.
While the government is still looking to curb such apps, the burgeoning digital lending market continues to be a lucrative breeding ground for such scamsters.
