ED Probes Chinese-Backed Fintech Firms & NBFCs For Laundering Assets Worth INR 940 Cr

The Directorate of Enforcement (ED), has mounted a crackdown on Chinese-backed fintech and NBFCs. The probe agency has found these companies have inked partnerships with ‘Chinese and Hong Kong persons’ to enter into the business of providing illegal ‘’instant personal loans’’ to the gullible public of the country.

The ED has also claimed that these fintech and NBFCs have generated ‘proceeds of crime’ of over INR 940 Cr by indulging in predatory lending activities and violating RBI guidelines while operating in India.

According to a PTI report, the ED officials have stated that fintech companies who are unlikely to get a fresh NBFC license from the RBI have devised the MoU route with defunct NBFCs to do large-scale lending activities. 

Consequently, ED has recently attached INR 86.65 Cr worth of funds lying in a total of 155 banks and payment gateway accounts of NBFCs including Kudos Finance and Investments, Acemoney (India) Limited, Rhino Finance and Pioneer Financial and Management Services and their linked fintech companies. 

The total attachment from such cases stands at a little below INR 300 Cr now. 

Last year, in May 2021, ED had attached assets worth over INR 76 Cr from three fintech companies led by Chinese nationals, and three non-banking financial companies. It had reportedly named payment gateway Razorpay and Paytm, asking them to stop processing payments for these rogue apps.

Later in October, ED seized INR 131 Cr from the accounts of Chinese-controlled NBFC PC Financial Services which runs the microloan app CashBean for alleged violation of foreign exchange norms. 

In June 2022, ED had asked payment gateways and banks to freeze bank accounts of nearly 100 fintech firms, including startups. The anti-money laundering agency took action after reports surfaced that Chinese nationals along with Indian fintech companies were carrying out illegal transactions. They were issuing loans to Indians at a high rate during the pandemic. 

A provisional order was issued under the criminal sections of the Prevention of Money Laundering Act (PMLA) to carry out the attachments, ED said. 

It was ‘projected’ that the NBFCs had hired fintech companies for customer discovery, but in reality, they were piggybacking on the license of the NBFCs and doing large-scale lending business, the agency said. 

The entire decision regarding fixation of interest rate, processing fee, platform fee, was taken ‘on the basis of instructions from Chinese, Hong Kong persons,’ it said. The ED has maintained its stance that the money lending business run by these fintech companies was illegal or not authorised under any law.

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