ED attaches Rs 105.32 cr bank balances of fintech firms having Chinese links

New Delhi, Aug 4 (IANS): The Enforcement Directorate (ED) on Wednesday said it has attached balances of Rs 105.32 crore, lying in various bank accounts and with payment gateway accounts, of 12 NBFCs, namely Inditrade Fincorp Ltd, Aglow Fintrade Pvt Ltd and others and their associated fintech companies in connection with a money laundering case.

The total attachment in this case is now Rs 264.3 crore.

The ED initiated money laundering investigation on the basis of various FIRs registered by the Cyber ​​Crime Police Station, Hyderabad under various sections of the IPC and Section 67 of the IT Act, following the suicide of various persons due to alleged harassment for loan repayment.

The agency has conducted money laundering investigations against a number of Indian NBFCs engaged in instant personal microloans.

It was learned that various fintech companies, backed by Chinese funds, have entered into agreements with these NBFCs to provide instant personal loans with tenors ranging from 7 days to 30 days.

The fintech companies falsely claimed that they were providing technical customer outreach services to the NBFCs, but in reality they were the actual lenders and controlled the entire lending process, according to the investigators.

These fintech companies themselves developed their own digital lending app, brought the funds to be lent to the public, signed MoUs with the defunct NBFCs for their lending license and parked the said funds in the NBFCs under the guise of security deposits. These funds were in turn returned to the fintech companies in separate MIDs (Merchant IsD) opened by the NBFC for the app of the fintech company, according to officials

Since the fintech companies were unlikely to get a new NBFC license from the RBI, they developed the MoU route with defunct NBFCs as a via media to carry out large scale lending activities. According to officials, it was estimated that the NBFCs had hired fintech companies for customer discovery, but in reality the fintech companies went on the license of the NBFCs and engaged in large-scale lending. The fintech companies then carried out the entire onboarding, lending and recovery work without any interference from the NBFCs.

Microloans were provided for a short period with a very high interest rate and high late fees, while mobile app lending took control of clients’ social media data. While the fintech apps made most of the profits, the NBFCs got a commission for allowing them to use their license.

Entire decisions on interest rate fixing, processing fees and platform fees were taken by fintech companies and these companies operated on the basis of instructions from Chinese and Hong Kong-based beneficial owners.

The above 12 NBFCs were among those who entered into MoUs with various foreign-backed fintech companies to conduct online lending business in India. As per the business conducted by the said 12 NBFCs and the fintech companies associated with the said companies, a total amount of Rs 4,430 crore was disbursed. Across the business, NBFCs and fintech companies have made a combined profit of Rs 819 crore and this is considered to be proceeds of crime.

ED has managed to identify balances of 233 bank accounts and is attaching the same under PMLA to preserve the proceeds of crime.

Earlier in this case, two PAOs were issued against 4 NBFCs and their fintech partners for a value of Rs 158.97 crore.