The Enforcement Directorate (ED) on Wednesday said it has attached funds worth Rs 6.17 crore of various fintech companies in a case linked to dishing out mobile-app-based loans at exorbitant interest rates to gullible people during the COVID-19 crisis.
A provisional order to attach the money was issued under the Prevention of Money Laundering Act (PMLA), it said.
The central agency opened an investigation based on two first information reports registered at the Marathahalli and Mahalakshmipuram police stations in suburban Bengaluru.
“The accused, along with Chinese nationals, opened various companies in the name of various persons for the purpose of illegal transactions, issuing loans and raising investments through mobile apps like Cash Master, Krazy Rupee, Cashin, Rupee Menu, etc,” the federal agency said, explaining the modus operandi employed in the alleged fraud.
“These companies have been incorporated during COVID spread time at common addresses by the active involvement of some Chinese nationals in connivance with certain Indian chartered accountants, who helped in the incorporation of these companies by using KYC documents of young Indian nationals in need of money, who were made directors/shareholders in these companies,” the ED statement read.
The companies’ bank accounts were being “operated or controlled” by Chinese nationals, on whose instructions they were incorporated. The fintech (financial technology) firms utilized their own funds received from abroad, mainly from China, to issue short-term loans through non-banking financial companies (NBFCs), the ED said.
The account numbers/payment gateways opened on the basis of Know Your Customer (KYC) documents of these Indian nationals were utilized to provide the loans, and “high processing fees and usurious interest rates” were charged, the ED said.
Unethical measures were adopted to recover the loan amount and high-interest rates, it noted.
ED words
High interest was charged to recover the loans. “Short-term loans were provided by these fintech companies through Non-Banking Financial Companies (NBFCs).
The fintech companies utilized their funds received from abroad (mainly from China) for the purpose of giving loans at usurious rates of interest to the unemployed youth and other vulnerable sections of society.
Through the NBFCs by making arrangements for a security deposit of the amount equivalent to the loans granted by the NBFCs to the borrowers.
During the course of the investigation, it was also revealed that these companies have layered and remitted the funds abroad,” said the ED.
