Fintech cos, NBFCs funded by Chinese money generated Rs 950-crore slush funds in India: ED

A number of fintech companies and NBFCs “backed by” Chinese funds have generated proceeds of crime worth more than Rs 940 crore by indulging in predatory lending activities and violating RBI guidelines while operating in India, the Enforcement Agency said on Wednesday.

The Federal Bureau of Investigation has initiated a breakdown of such companies which, it said, “operated on the basis of instructions from Chinese Hong Kong people” when they entered into agreements with a number of domestic non-bank financial companies (NBFCs) to go into the business of giving illegal “immediate personal loans” to gullible public in the country, found a money laundering investigation.

The Enforcement Directorate (ED) has therefore recently attached funds worth Rs 86.65 crore which are in a total of 155 bank and payment gateway accounts to NBFCs such as Kudos Finance and Investments Private Limited, Acemoney (India) Limited, Rhino Finance Private Limited and Pioneer Financial and Management Services Private Limited and their affiliated fintech companies.

A preliminary order was given under the criminal parts of the Money Laundering Prevention Act (PMLA) to carry out the attachments, it said.

“ED has conducted a money laundering investigation against a number of NBFC companies that operate immediate personal microloans.”

“It was found that various fintech companies (financial technology) supported by Chinese funds have entered into agreements with these NBFC companies to provide immediate personal loans with a maturity of 7-30 days,” the agency said in a statement.

Fintech companies brought the funds to be lent to the public, made MoU (memorandum of understanding) with “closed” NBFCs for their lending license, it is said.

“Since fintech companies were unlikely to obtain a new NBFC license from RBI, they developed the MoU route with discontinued NBFCs as one via the media to carry out large-scale lending activities,” ED found.

It was “projected” that the NBFCs had hired fintech companies for customer discovery, but in reality they were piggybacking on the license of the NBFCs and engaged in large-scale lending, the agency said.

The whole decision regarding the determination of interest / processing fee / platform fee etc. was made “on the basis of instructions from Chinese, Hong Kong people,” it said.

“An amount of Rs 940,46,39,498 has been deemed to be the proceeds of crime, as the same was obtained by predatory lending activities in violation of RBI’s guidelines,” said ED.

The agency had previously linked funds of Rs 72.32 to Kudos Finance and Investments Private Limited and its fintech partners.

The total attachment, in this case, stands at Rs 158.97 crore now, it was said.