The Enforcement Directorate has seized ₹131.12 crore lying in the bank and payment-gateway accounts of PC Financial Services Private Limited (PCFS) under the Foreign Exchange Management Act, in connection with the scam involving extortion of high interest rates against the micro personal loans given via mobile Apps.
In the same case, the agency had earlier seized ₹106.93 crore linked to the company controlled by a Chinese national named Zhou Yahui. Funds of ₹90 crore have already been transferred to the ED accounts.
As alleged, PCFS provided instant personal micro loans through its mobile App “Cash Bean”. It was a wholly owned subsidiary of Oplay Digital Services, SA de CV (Mexico), which was wholly owned subsidiary of Hong Kong-based Tenspot Pesa Limited, which in turn was co-owned by Opera Limited (Cayman Islands) and Wisdom Connection I Holding Inc (Cayman Islands).
The ED found that 52.63% of Wisdom Connection I Holding Inc and 42.35% of Opera Limited were owned directly or indirectly by Zhou Yahui.
Chinese-controlled company
As it turned out, PCFS was incorporated by Indian nationals in 1995 and it got the Non-Banking Financial Company licence in 2002. Following an approval from the RBI in 2018, the company’s ownership moved to the Chinese-controlled company.
The agency found that the overseas parent companies of PCFS brought in ₹173 crore as Foreign Direct Investment for lending business and within a short span of time, made outward remittances worth ₹429.29 crore under the guise of payments for software and other services. It also showed high domestic expenditure of ₹941 crore.
A detailed probe into the foreign expenses revealed that most of the payments were made to the overseas companies related to the same Chinese nationals who owned the Opera Group.
“All the foreign service providers were chosen by the Chinese owners and the price of the services was also fixed by them...highly inflated payments were blindly allowed by the dummy Indian directors of PCFS without any due diligence, on the instructions of the country head, Zhang Hong, who directly reported to Zhou Yahui,” said an official.
Pretext of licence fee
The PCFS remitted forex worth ₹429 crore to 13 foreign companies located in Hong Kong, China, Taiwan, the U.S. and Singapore on the pretext of licence fee for “Cash Bean” App, software technical fee and online marketing/advertisement fee. The agency said these services and applications were available in India at a fraction of the cost incurred by PCFS, whose all clients were in India.
During the check period, PCFS also booked domestic expenditure of a similar amount under the same heads. Its management allegedly failed to justify the expenses and admitted that all the remittances were done to park the money abroad in the accounts of group companies controlled by the Chinese promoter, it is alleged.
