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On September 3, the Enforcement Directorate (ED) announced that six online payment gateway locations in Bengaluru had been raided due to alleged irregularities in mobile app-based loans that were "managed" by Chinese individuals.

Which companies were raided?

Razorpay, Paytm and Cashfree were among the companies that were reportedly raided, according to ED. Paytm declined to comment, but Razorpay and Cashfree indicated that companies were working with the government authorities.

Cashfree Payments said their "operations and on-boarding processes adhere to the PMLA and KYC directions, and we will continue to do so."

"We extended our diligent co-operation to the ED operations, providing them the required and necessary information on the same day of enquiry," the spokesperson added.

"Some of our merchants were being investigated by law enforcement about a year-and-a-half back. As part of the ongoing investigation, the authorities requested additional information to help with the investigation," a Razorpay spokesperson said.

"We have fully cooperated and shared KYC and other details. The authorities were satisfied by our due diligence process."

Why were they raided?

Since the COVID-19 epidemic broke out throughout the nation in 2020, these payment gateway companies have been the target of ED action.

The enterprises under investigation, according to the ED, were creating proceeds of crime through various merchant IDs/accounts kept with payment gateways/banks and were not operating out of the locations mentioned on the MCA (minister of corporate affairs) website or at the registered address. The ED inquiry discovered that these companies had "fake" addresses.

Also Read: Razorpay receives RBI approval for payment aggregator license

After several cases of credulous debtors killing themselves emerged from various states, the ED opened an investigation under the criminal provisions of the Prevention of Money Laundering Act (PMLA).

Even if their interest rates were "usurious", it was claimed that the corporations obtained all of the loan applicant's personal information at the time these applications were downloaded into their phones.

The police claimed that these credulous debtors were being coerced and harassed by these loan app companies by having access to their personal information on their phones and employing aggressive tactics to threaten them.

Also Read: Razorpay to pick up stake in Ezetap

The searches that started Friday as part of an ongoing probe are still underway, the agency said this evening. The federal probe agency also said that during the raids, it has seized 17-crore worth funds kept in "merchant IDs and bank accounts of these Chinese persons-controlled entities".

What does ED say?

The ED said this money laundering case was based on at least 18 FIRs filed by the Bengaluru Police cyber crime station 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 claimed that these entities' "modus operandi" in the present instance was to create "proceeds of crime" by using Indians' false identification documents as dummy directors.

Also Read: Delhi: Paytm transaction of 100 helps police arrest 3 in robbery case

"These entities are controlled/operated by Chinese persons," the ED 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."

"It has come to notice that the said entities were doing their suspected/illegal business through various merchant IDs/accounts held with payment gateways/banks," it added.

(With PTI inputs)

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