ED conducts fresh raids in Chinese loan money laundering case

The Enforcement Directorate on Wednesday carried out fresh raids against some payment gateways and others in connection with its ongoing money laundering probe linked to alleged financial irregularities by instant app-based loan companies "controlled" by Chinese persons, official sources said.

They said premises linked to certain payment gateway operators, some companies engaged in these loan app transactions and operators in around three states are being searched.

A spokesperson for Paytm said the action was linked to the same matter where the agency had undertaken searches earlier this month.

"As we have mentioned before, ED continues to seek information about certain merchants from various payment service providers, we have shared the required information," Paytm said.

The federal agency, on September 2, raided the Bengaluru-located premises of payment gateways like Paytm, Razorpay and Cashfree as part of this investigation.

During the raids, it had then said, Rs 17-crore worth of funds kept in merchant IDs and bank accounts of these Chinese persons-controlled entities" were seized.

Finance Minister Nirmala Sitharaman had also discussed various issues related to illegal loan apps in a meeting of top ministry and RBI officers held on September 8 and decided to take a host of measures to check the operations of such apps.

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, with the police stating they were being coerced and harassed by these loan app (application) companies by publicising their personal details available in their phones and by undertaking high-handed methods.

It was alleged that the companies sourced all personal data of the loan-taker at the time 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 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 had 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."