The Enforcement Directorate conducted a raid on PayTM, Razorpay, and Cashfree’s offices on Saturday. These payment gateways are suspected of facilitating unauthorized transactions on lending apps operated by Chinese-owned businesses. Some of these businesses allegedly engage in unlawful betting. The ED is looking into allegations that a case involving non-banking financial companies (NBFCs) and their fintech partners violated RBI standards by using predatory lending methods.

The agency also asserts that many of these businesses shut down following the start of the investigation and shifted a sizable sum of money through fintech businesses to purchase bitcoin assets, which were subsequently laundered overseas in connection with a recent search of WazirX, a well-known cryptocurrency exchange, it frozen Rs 64 crore in its accounts.

Additionally, according to the regulator, these NBFCs hired telemarketers to abuse the borrowers’ personal information and charge them with excessive interest rates. An estimated Rs 47 crore that belonged to a Chinese company was frozen by the ED in August 2020. Fifteen locations in Delhi, Gurgaon, Mumbai, and Pune that were connected to the company, its directors, and its chartered accountants were also searched by the agency.

The agency then alleged that “lax due diligence” and “non-reporting of suspicious transactions” by online payment gateways, including PayTM, Razorpay, and Cashfree, allowed this betting ring to flourish. It is possible that the gateways’ inadequate oversight allowed hawala transactions as well.

About Alibaba

Alibaba, a Chinese firm, has invested a sizable amount in Paytm. Several Chinese nationals, with the aid of Indian chartered accountants and Indian directors, created numerous Indian firms, according to the agency. The directorship is said to have been taken up afterward by Chinese nationals who traveled to India.

“Some locals were hired and used to open bank accounts with HSBC Bank and open trade accounts with online wallets, namely PayTM, Cashfree, Razorpay, etc. These online wallets had lax due diligence mechanisms, and their non-reporting of suspicious transactions to regulatory authorities helped accused companies to launch pan-India operations,” ED said.

The agency claims that when bank accounts were opened, the Chinese owners’ significant payment orders were couriered to India by the Indian staff together with their login credentials. Numerous websites with comparable design elements were allegedly floated by corporations and hosted in the US by Cloudflare.

These websites attracted credulous individuals who would wager on numerous apps. Through the use of referral codes, a network of agents lured thousands of Indian consumers by creating closed groups on Telegram and WhatsApp.”PayTM and Cashfree were used to collect the money and pay commissions to all these agent members. Hundreds of websites were created to promote online betting under the garb of e-commerce.

All of these websites were not activated daily. Some were activated for placing the bets, and the information on daily active websites was shared to the members using Telegram groups,” the agency claimed.

Agency’s Claims

The agency claimed to have discovered several bank accounts, the majority of which were held with HSBC Bank. According to an analysis of two accounts held by M/s Dokypay Technology Private Limited, one account received Rs 1,268 crore over the course of the previous year, of which Rs 300 crore arrived via PayTM, and that about Rs 600 crore was moved out using the same gateway.

Further, a similar pattern was identified by M/s Linkyun Technology’s account investigation, the ED said, “outward foreign remittances for payments to the extent of Rs 120 crore” from these accounts. Unaccounted-for transactions with additional Indian businesses that operated Chinese dating applications for Indian users were also found.

The organization claimed it was attempting to get information from HSBC Bank and the online wallets. In response to the raids, Razorpay said, “A few of our merchants were investigated by the law enforcement about a year and a half back. As part of an ongoing investigation, authorities requested additional information to help with the investigation. We have fully cooperated and also shared KYC and other details. Also, the authorities were satisfied by the due diligence process.”

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