On Sunday, One97 Communications, a digital financial services company operating under the Paytm brand, denied any ties to merchants under law enforcement scanners in the case of the Chinese lending app. Paytm said the funds frozen by the Enforcement Directorate (ED) did not belong to her or any of her group companies.
“As part of an ongoing survey of specific merchant groups, ED obtained information about merchants to whom we provide payment processing solutions. We want to be clear that these merchants are independent companies and none of them are affiliated with us. Group of companies.’ Paytm said in a regulatory filing.
The Education Department said on Saturday it raided six online payment gateway venues in Bengaluru, including Razorpay, Paytm and Cashfree, citing irregularities in Chinese-controlled instant app-based loans.
The agency said the search, which began on Friday as part of an ongoing investigation, is still ongoing. The FBI also said that during the raid, they confiscated funds worth Rs 170 crore in “dealer IDs and bank accounts of these Chinese holding companies”.
“It is worth noting that ED has directed us to freeze certain amounts in the Merchant ID (MID) of specific merchant entity groups (as ED stated in its press release). It may also be noted that the funds ordered to freeze were Not part of Paytm or any of our group companies,” Paytm said.
The ED initiated a probe under the criminal sections of the Prevention of Money Laundering Act (PMLA) after a number of instances of gullible debtors ending their lives came to the fore from various states, with the police stating they were being coerced and harassed by these loan app (application) companies by publicising their personal details available in their phones and by undertaking high-handed methods to threaten them.
When the apps were downloaded onto their phones, the companies allegedly had access to all of the borrowers’ personal information, even with their “extraordinary” interest rates. The agency has said the proceeds of the alleged crime in the case were sent through these payment gateways.
Discussing the case at hand, the ED said the “modus operandi” of the facilities was that they used forged documents from Indians to make them fake directors, thereby generating “criminal proceeds”.
“These companies are controlled/operated by the Chinese.”
“The aforementioned companies have been identified as conducting suspicious/illegal transactions through various merchant IDs/accounts of payment gateways/banks,” the ED said. Paytm said it is fully cooperating with the authorities and that all policy measures are properly followed.