Fintechs & NBFCs generated INR 950 Cr in slush funds in India: ED

Enforcement Directorate

Enforcement Directorate (ED) has said fintech and NBFCs funded by Chinese money generated INR 950 Cr in slush funds in India.

The ED recently claimed that a number of fintech companies and NBFCs have been ‘backed by’ Chinese funds by engaging in predatory lending activities and violating RBI regulations while operating in India.

According to its statement, a provisional order was issued under the criminal sections of the Prevention of Money Laundering Act (PMLA) to carry out the attachments.

As per the reports, these companies were charged under the Prevention of Money Laundering Act (PMLA) and action will be taken against those involved.

The federal investigation agency has launched a crackdown on such companies, which were “operating on the basis of instructions from Chinese, Hong Kong persons,” said the report.

The companies signed agreements with a slew of domestic non-banking financial companies (NBFCs) to provide illegal ‘instant personal loans’ to the country’s gullible public, a money-laundering investigation found.

As a result, the ED recently attached funds totaling INR 86.65 Cr held in 155 bank and payment gateway accounts of NBFCs.

The list includes several financial organisation such as Kudos Finance and Investments Private Limited, Acemoney (India) Limited, Rhino Finance Private Limited, and Pioneer Financial and Management Services Private Limited, as well as their linked fintech companies.

“ED has been conducting a money-laundering investigation against a number of NBFC companies which are in the business of instant personal micro loans,” the reports stated.

Sources showed that the fintech companies backed by Chinese funds have made agreements with these NBFC companies for providing instant personal loans of terms ranging from 7-30 days.

“It was found that various fintech (financial technology) companies backed by Chinese funds have made agreements with these NBFC companies for providing instant personal loans of term ranging from 7-30 days,” the agency reported.

According to the report, fintech companies brought the funds to be lent to the public and signed an MoU (memorandum of understanding) with ‘defunct’ NBFCs for their lending licence.

“Since the fintech companies were unlikely to get a fresh NBFC licence from the RBI, they devised the MoU route with defunct NBFCs as a via media to do large-scale lending activities,” the ED revealed.

According to the agency, it was ‘projected’ that the NBFCs employed fintech companies for customer discovery, but in reality they were piggybacking on the NBFCs’ licences and undertaking large-scale loan operations.

“Entire decision regarding fixation of interest rate/processing fee/platform fee etc, were taken “on the basis of instructions from Chinese, Hong Kong persons,” it noted.

“An amount of Rs 940,46,39,498 has been considered to be proceeds of crime as the same was gained by way predatory lending activities in violation of RBI guidelines,” the ED stated.

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The agency had previously attached INR 72.32 Mn in funds from Kudos Finance and Investments Private Limited and its fintech partners.

According to the statement, the total amount of attachment in this case currently stands at INR 158.97 Cr.

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