The Enforcement Directorate (ED) has seized ₹106.93 crore lying in the bank and payment gateway accounts of PC Financial Services Private Limited under the Foreign Exchange Management Act (FEMA), in connection with a racket involving the extortion of high interest rates against the microloans given via mobile apps.
The agency is also pursuing a money laundering angle against several non-banking financial and fintech companies, based on police cases alleging that the personal data of the customers was used to threaten them and extort high interest rates from them.
During its inquiry against PC Financial Services under FEMA, the ED found that it also provided instant personal microloans through a mobile app named “Cash Bean”.
Investigation into the company’s ownership pattern revealed that it was a wholly-owned subsidiary of Mexico-based Oplay Digital Services, which was a wholly-owned subsidiary of Tenspot Pesa Limited (Hong Kong) that was owned by Opera Limited and Wisdom Connection I Holding Inc. of the Cayman Islands. The last two entities “are ultimately beneficially owned by a Chinese national, Zhou Yahui”.
PC Financial Services was set up in 1995 by Indian nationals. It got a non-banking financial company licence in 2002 and after the Reserve Bank of India (RBI) approval in 2018, the ownership moved to the Chinese-controlled entities.
The foreign parent companies brought in ₹173 crore for lending business and within a short span of time, made foreign outward remittances worth ₹429.29 crore in the name of payments for various services.
According to the ED, PC Financial Services also showed a high domestic expenditure of ₹941 crore. A detailed probe into its overseas expenses revealed that most of the payments were made to the foreign entities related to the same Chinese nationals who owned the Opera Group.
“All foreign service providers were chosen by the Chinese owners and the price of the services was also fixed by them... Exorbitant payments were blindly allowed by the dummy Indian directors of PC Financial Services without any due diligence and on the instructions of the country head, Zhang Hong, who directly reported to Zhou Yahui, a resident of China,” said the agency.
PC Financial Services had remitted foreign exchange worth ₹429 crore to 13 foreign companies located in Hong Kong, China, Taiwan, the United States and Singapore. The funds were sent on the pretext of licence fee for the “Cash Bean” app (₹245 crore per annum) and software technical fee (about ₹110 crore), besides online marketing and advertisement fee (around ₹66 crore).
All these services were available in India at a fraction of the cost shown, said the agency.
“Simultaneously, during the same period of time, PC Financial Services also booked domestic expenditure of similar amount under the same heads... Its management failed to give any justification for these expenses and admitted that all remittances were done to move money out of India and to park it abroad in the accounts of group companies controlled by the Chinese promoter,” said the ED.
