The Law Enforcement (ED) Directorate said on Thursday that it had seized funds worth around Rs 107 crore from a Chinese-controlled NBFC, engaged in providing instant personal loans via an Internet application, for alleged violation of the foreign exchange law.
The agency said that the funds of PC Financial Services Private Limited (PCFS), a non-bank financial company (NBFC), were in bank accounts and virtual accounts through online payment gateways and that these had been seized under the provisions of the Foreign Exchange Management. law (FEMA).
The total amount seized is Rs 106.93 crore.
ED said the matter came on its radar during an ongoing money laundering investigation against a number of NBFCs and FinTech companies linked to instant personal loan mobile apps.
These loans were granted with a high interest rate and recovered by illegally using customers’ personal data and threatening and abusing them through call centers, the agency said in a statement.
The alleged illegalities of these apps were reported by a number of states in the past year, particularly following the economic stress triggered by the lockdown imposed to curb the spread of COVID-19, and a number of people are said to have been forced to end their lives. due to the extortion and intimidation of these “dodgy” companies.
In the last case, the NBFC provided such loans through a mobile phone application called “cashbean”.
“PCFS is a wholly owned subsidiary (WOS) of Oplay Digital Services, SA de CV, Mexico, which is in turn a WOS of Tenspot Pesa Limited, Hong Kong, owned by Opera Limited (Cayman Islands) and Wisdom Connection I Holding Inc. (Cayman Islands), ultimately owned by Chinese national Zhou Yahui.
“The original Indian company, PCFS, was incorporated in 1995 by Indian nationals and obtained the NBFC license in 2002 and after RBI approval in 2018, ownership was transferred to the Chinese-controlled company” , said the ED.
The ED survey found that the foreign parent companies of PCFS brought in Foreign Direct Investments (FDI) worth Rs 173 crore for lending activities and in a short period of time made remittances of overseas funds of Rs 429.29 crore in the name of software payments. services received from related foreign companies.
PCFS also showed high domestic spending of Rs 941 crore, the agency said.
A “detailed” investigation showed that most of the foreign expenses paid by the company went to foreign companies, which are related to and owned by the same Chinese nationals who own the Opera Group, he claimed.
“All foreign service providers were chosen by the Chinese owners and the price of the services was also set by them.
“ED discovered that exorbitant payments were blindly authorized by the bogus Indian directors of PCFS, without any due diligence and on the instructions of the head of the country Zhang Hong, who reported directly to Zhou Yahui, a resident of China,” said the agency.
PCFS handed over currency worth Rs 429 crore to 13 foreign companies located in Hong Kong, China, Taiwan, USA and Singapore under the guise of payments for the license fees of the app” cashbean” (at Rs 245 crore per annum), technical software fees (of around Rs 110 crore) and online marketing and advertising fees (of around Rs 66 crore), he alleged.
ED said all of these services and applications are available in India at a “fraction” of the cost incurred by PCFS.
“Furthermore, all NBFC clientele was in India and despite this, huge payments were made overseas and no proof of receipt of service is there.
“At the same time, during the same period, PCFS also recorded domestic expenses of a similar amount under the same expense headings,” he alleged.
The agency alleged that the company’s management ‘didn’t’ provide justification for the expenses and admitted that all the remittances were made to get money out of India and park it abroad in the accounts of group companies “controlled” by the Chinese promoter.
Hence, he accused PCFS of “illegally” transferring huge funds out of India under the guise of importing non-existent software and marketing services to store the funds overseas and keep them on the accounts of related foreign companies, which led to a breach of FEMA.
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