Enforcement
Directorate (ED), India’s premiere financial crime investigating agency, raided
Bengaluru-based offices of payment gateways that allegedly facilitated
transactions on instant loan apps illegally run by Chinese companies. On
Saturday, ED raided the offices of Paytm, Razorpay and Cashfree. The probe
agency said it seized Rs 17 crore worth funds kept in “merchant IDs and bank
accounts of these Chinese persons-controlled entities,” PTI reported.

What is
the Chinese instant loan apps case?

The Chinese
instant loan apps case involves mobile applications giving out instant loans.
India’s Enforcement Directorate is investigating a case where non-banking
financial companies (NBFCs) and their lending partners allegedly indulged in
predatory lending practices. The ED has alleged that NBFCs employed tele-callers
who misused personal data and used abusive language while charging high
interest rates from borrowers.

Also Read | Chinese loan apps case: ED raids Razorpay, Paytm, Cashfree

According
to the Enforcement Directorate, a number of Chinese nationals set up Indian
companies enabled by Indian chartered accountants and directors. Subsequently,
they travelled to India and took over the companies.

Why is
ED probing payment gateways?

The
Enforcement Directorate says Chinese nationals who floated Indian companies
were enabled by locals to open bank accounts with HSBC Bank and trade accounts
with online payment gateways such as Paytm, Razorpay and Cashfree. The probe
agency alleges that these companies did not practice due diligence and did not
report suspicious transactions which “helped the accused companies to launch
pan-India operations.”

The
Enforcement Directorate said that once bank accounts were opened, login credentials
would be couriered to China via Indian enablers and Chinese owners would instruct
on major payments. The companies allegedly floated a number of similar-looking
websites hosted on Cloudfare in the US.

What did
the ED find?

During
Saturday’s raid, the Enforcement Directorate seized Rs 17 crore worth funds.
The agency said Paytm and Cashfree were used to pay commissions to agent
members who worked for these Chinese nationals. Further, hundreds of websites
were created to promote online gambling under the garb of e-commerce, the probe
agency said.