The Enforcement Directorate initiated search operations under the Prevention of Money Laundering Act (PMLA), 2002 on Friday at six offices of Paytm, Razorpay, and Cashfree Payments, the agency announced on Saturday. The search was conducted as a part of the agency’s investigation into Chinese loan apps.
“The case is based on 18 Nos of FIRs registered by Cyber Crime Police Station, Bengaluru City 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,” the ED said in a statement. The search is still ongoing, the agency said.
“We extended our diligent co-operation to the ED operations, providing them the required and necessary information on the same day of enquiry. Our operations and on-boarding processes adhere to the PMLA and KYC directions,” a Cashfree Payments spokesperson said in a statement.
“We are supporting law enforcement agencies, who are investigating a specific set of merchants,” a Paytm spokesperson told Entrackr. “The authorities reached out to us with directions to provide certain information about these merchants under scrutiny, to which we promptly responded.” In a later statement to board exchanges, Paytm said, “We wish to clarify that these merchants are independent entities, and none of them are our group entities.”
“A few of our merchants were being investigated by law enforcement about a year and a half back,” a Razorpay spokesperson said in a statement. 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.” In an earlier statement, Razorpay said it was asked to provide data on Chinese lenders.
“During enquiries, it has emerged that these entities are controlled/operated by Chinese Persons. The modus operandi of these entities is by using forged documents of Indians and making them as dummy directors of those entities, they are generating proceeds of crime,” the agency said.
The Chinese-owned operations were doing business using services by Razorpay, Cashfree Payments, Paytm Payment Services. ED also searched entities tied to the Chinese nationals.
The Chinese loan apps were doing business based on fake addresses, the ED said. Rs 17 crore in merchant IDs and bank accounts of these Chinese persons-controlled entities were seized.
The ED has been cracking down on Chinese loan apps for what they describe as undue harassment of borrowers through predatory lending. In August, the agency attached bank accounts with the NBFCs Inditrade Fincorp and Aglow Fintrade. It also froze accounts belonging to WazirX’s parent company.
Payment gateway firms like Razorpay and Paytm have been on the radar of the ED since at least January, when the agency said that defunct NBFCs were tying up with Chinese loan app makers and operating the businesses through merchant IDs created on platforms owned by these gateways.
Update (September 4): Added newer statements by Razorpay and Paytm.
Disclosure: Entrackr has an advertising partnership with Cashfree Payments.