The Enforcement Directorate has conducted raids at Bengaluru offices of online payment gateways like Razorpay, Paytm and Cashfree as part of its investigations into “illegal” Chinese loan apps.
The searches, which started on Friday as part of an ongoing probe, are still underway, the agency said on Saturday evening.
During the raids, ED said it has seized Rs 17 crore worth of funds kept in “merchant IDs and bank accounts of Chinese-controlled entities”.
“Some of our merchants were being investigated by the law enforcement about a year-and-a-half back,” a Razorpay spokesperson said. “As part of the ongoing investigation, the authorities requested additional information to help with the investigation. We have fully cooperated and shared KYC and other details. The authorities were satisfied by our due diligence process.”
Cashfree Payments said that their operations and onboarding processes adhere to the PMLA and KYC directions, and “we will continue to do so”. “We extended our diligent cooperation to the ED…providing them the required and necessary information on the same day of enquiry.”
Paytm said the law enforcement agencies are investigating a specific set of merchants. “The authorities reached out to us with directions to provide certain information about these merchants under scrutiny, to which we promptly responded,” a spokesperson for the fintech firm said. “We continue to cooperate with the authorities and remain fully compliant.”
India’s payment gateways have been on the ED’s radar since the pandemic started in early 2020, when a number of app-based loan frauds surfaced. The police had then said that several gullible debtors were being coerced and harassed by loan app companies, who threatened to make public their personal details available in their phones.
It was alleged that the companies sourced all personal data of the debtor at the time downloading of these apps on their phones, even as their interest rates were “usurious”.
The ED said that the “modus operandi” of these entities was that they use forged documents of Indians and made them dummy directors leading to 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 and banks,” the ED said. It 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 and banks and they are also not operating from the addresses given on the MCA 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 Bengaluru Police Cyber Crime Station against “numerous entities and 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”.
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