China-backed fintech firms in India face fresh ED raids in money laundering probe

The recent raid on certain fintech firms that are believed to be backed by China led to the discovery of certain firms using 'dummy' directors and local subscribers to operate on behalf of Chinese entities within India

FP Staff January 03, 2024 15:28:37 IST
China-backed fintech firms in India face fresh ED raids in money laundering probe

The recent raid on certain fintech firms that are believed to be backed by China led to the discovery of certain firms using "dummy" directors and local subscribers to operate on behalf of Chinese entities within India

The Enforcement Directorate (ED) has launched a fresh round of investigations aimed at two companies allegedly tied to Chinese nationals implicated in a money laundering scandal centred around lending practices through mobile applications.

The raids, carried out on December 21 at 19 locations spanning Delhi-NCR, Chandigarh, Haryana, Punjab, and Gujarat, specifically targeted Shinebay Technology India Private Limited (STIPL) and Mpurse Services Private Limited (MSPL), among other entities identified as purportedly “owned and controlled” by Chinese individuals, according to an official statement from the ED.

Detailing the modus operandi, the ED disclosed that these Chinese-owned fintech companies, in collaboration with non-banking financial entities and payment gateways, provided short-term loans through mobile apps, imposing exorbitant interest rates on borrowers.

The agency further alleged that borrowers were subjected to harassment tactics, including unauthorised access to personal data, imposition of exploitative fees, systematic abuse, threats in case of repayment failure, intentional data leaks, circulation of manipulated images, and the issuance of counterfeit legal notices.

The investigation also brought to light the use of “dummy” directors and local subscribers to operate on behalf of Chinese entities within India.

According to the ED, Chinese nationals meticulously established a network of fintech and non-banking entities in India, enlisting the assistance of local professionals such as chartered accountants, lawyers, company secretaries, and consultants to facilitate their operations.

The roots of this money laundering case can be traced back to FIRs filed by the police in Karnataka and Telangana.

In the recent searches, the ED seized approximately Rs 1.30 crore in cash, along with incriminating documents and digital records. This action follows earlier measures taken in June, when the agency conducted searches at multiple locations and seized bank deposits and fixed assets valued at Rs 19.43 crore.

(With inputs from agencies)

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