ED crackdown on owners of Cashbean loan app continues, Rs 300 crore attached

ED has alleged that the PCFS, controlled by a Chinese national through a maze of shell companies, was involved in money laundering and violation of FEMA.
Enforcement Directorate (File Photo | PTI)
Enforcement Directorate (File Photo | PTI)

NEW DELHI: The Enforcement Directorate (ED) has seized an additional amount of Rs 51.22 crore lying in the bank accounts and virtual accounts with payment gateways of fintech company PC Financial Services Private Limited (NBFC). The enforcement agency has already attached Rs 238 crore from the Gurgaon-based PC Financial Services, which provides instant personal microloans through its mobile application ‘Cashbean’.

ED has alleged that the PCFS is controlled by a Chinese national through a maze of shell companies. It has also accused the firm of money laundering and violation of the Foreign Exchange Management Act (FEMA).

According to the enforcement agency, PCFS is a wholly-owned subsidiary of Oplay Digital Services, SA de CV, Mexico, which is, in turn, is owned by TenspotPesa Limited of Hong Kong.  TenspotPesa, on the other hand, is owned by Opera Limited (Cayman Islands) and Wisdom Connection I Holding Inc (Cayman Islands), which are ultimately beneficially owned by Chinese national Zhou Yahui. The original Indian Company PCFS was incorporated in 1995 by Indian nationals and got NBFC license in 2002 and after RBI approval in 2018, the ownership moved to the Chinese controlled company.

ED’s investigations reveal that the fintech company provides micro loans through its mobile app for suspicious foreign outward remittances.

Investigations have found that the foreign parent companies of PCFS brought in Rs 173 Crore worth of FDI for lending business and within a short span of time, made foreign outward remittances worth Rs 429 crore in the name of payments for software services received from related foreign companies.

The fintech company also showed high domestic and foreign expenditures.  A detailed investigation into the foreign expenses paid by the NBFC revealed that most of the payments were made to foreign companies, which are related and owned by the same Chinese nationals.

ED has also found that exorbitant payments were 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 one Zhou Yahui in China.

PCFS remitted forex worth Rs 429 Crore to 13 foreign companies located in Hong Kong, China, Taiwan, USA and Singapore in the guise of payments for the License fee for Cash Bean Mobile APP (Rs 245 Crore per annum), Software technical fee (of around Rs 110 Crore), online marketing & advertisement fee (of around Rs 66 Crore).

According to the Enforcement Directorate, all these services and applications are available in India at a fraction of the cost incurred by PCFS.

The agency further says that though all the clientele of the NBFC was in India, huge payments were made abroad without any proof of receipt of service. Simultaneously, during the same period of time, PCFS also booked domestic expenditure of a similar amount (of Rs 941 crore) under the same heads of expenditure.

PCFS 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.

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The New Indian Express