ED seizes ₹51.22 crore in micro loan scam

The case involves the alleged extortion of high interest rates against micro personal loans given via mobile apps

December 16, 2021 03:53 am | Updated 03:53 am IST - NEW DELHI:

The Enforcement Directorate (ED) has seized over ₹51.22 crore lying in the bank and virtual accounts of PC Financial Services Private Limited (PCFS), taking the total seizure so far to ₹288 crore in a case involving the alleged extortion of high interest rates against micro personal loans given via mobile apps.

The agency, which has taken the latest action under the Foreign Exchange Management Act (FEMA), is already probing several Non-Banking Financial Companies (NBFC) and fintech firms under the Prevention of Money Laundering Act. They allegedly provided personal loans through mobile apps and threatened customers with high interest rates.

During the investigation, the ED also initiated an inquiry against PCFS under FEMA. It found that the company was a wholly owned subsidiary of Oplay Digital Services, SA de CV, Mexico, which was a wholly owned subsidiary of TenspotPesa Limited (Hong Kong), owned by Opera Limited (Cayman Islands) and Wisdom Connection I Holding Inc (Cayman Islands). The Cayman Islands-based entities were beneficially owned by a Chinese national, Zhou Yahui, as alleged.

The original company, PCFS, was set up in 1995 by Indian nationals. It received an NBFC licence in 2002 and following the Reserve Bank of India’s (RBI) approval in 2018, its ownership moved to the “Chinese-controlled” company.

The agency alleged that the foreign parent companies of PCFS brought investments to the tune of ₹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 software services received from related foreign companies.

“PCFS also showed high domestic expenditure of ₹941 crore...most of the payments were made to foreign companies, which are related and owned by the same Chinese nationals who own the Opera Group,” it said, adding that all service providers were chosen by the Chinese owners and the price was also fixed by them.

Exorbitant payments were allowed by the dummy Indian directors on the instructions of the country head, Zhang Hong, who directly reported to Zhou Yahui.

PCFS remitted foreign exchange worth ₹429 crore to 13 companies located in Hong Kong, China, Taiwan, the United States and Singapore for services and applications that were available in India at a fraction of the cost incurred, it is alleged.

The ED has accused PCFS of illegally remitting huge funds outside India in the guise of imports of non-existent software and marketing services to park the funds abroad and hold them in the accounts of related foreign companies.

Based on the agency’s findings, the RBI and the Income-Tax Department have also initiated inquiries against the company, it said.

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