ED raids Razorpay, Paytm, Cashfree in Chinese loan-apps case

The Enforcement Directorate conducted the raids as it suspected that illegal app-based loans were being directed through multiple merchant IDs registered with the payment gateways.
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The Enforcement Directorate (ED) on Saturday said it is conducting raids at Bengaluru premises of online payment gateways like Razorpay, Paytm, and Cashfree Payments as part of an ongoing probe against "illegal" instant smartphone-based loans "controlled" by Chinese persons.

The searches were conducted on Friday at six premises in Karnataka's capital city, it said in a statement. The search operation is in progress, the ED said.

The federal probe agency said it has seized Rs 17 crore worth of funds kept in "merchant IDs and bank accounts of these Chinese persons-controlled entities" during the raids.

The modus operandi of these entities is that they use forged documents of Indians and make them dummy directors, leading to the generation of "proceeds of crime", ED alleged.

Image: Getty Images

"These entities are controlled/operated by Chinese persons," it said. "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."

"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," the ED said.

The entities under investigation were generating proceeds of crime through various merchant IDs/accounts held with payment gateways/banks, and they are also not operating from the addresses given on the MCA (ministry of corporate affairs) website/registered address and they have "fake" addresses, the agency said.

The ED said its money laundering case is 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."

Razorpay responded to the developments in a statement saying that the authorities were satisfied by the company's due diligence process.

"A few 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. We have fully cooperated and shared KYC and other details," the statement read.

On Sunday, Cashfree Payments issued a statement saying, "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, and we will continue to do so."

(The story was updated with the response from Razorpay and Cashfree Payments. Other than the company statement, the story was taken from PTI.)

Edited by Kanishk Singh

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