The Enforcement Directorate (ED) has seized an amount of Rs 106.93 crore lying in bank accounts and virtual accounts with payment gateways belonging to Chinese controlled firm PC Financial Services Private Limited (PCFC) on charges of violating Foreign Exchange Management Act, 1999 (FEMA) regulations.
PCFC is a Non-Banking Financial Corporation (NBFC) that provides instant personal microloans through its mobile application 'Cashbean' for suspicious foreign outward remittances, the ED said on Thursday.
The agency is investigating a number of NBFCs and Fintech companies under PMLA, 2002 for providing instant micro-loans using mobile apps and then extorting high rates of interest by using the personal data of the customers illegally and threatening and abusing them through call centers.
During the course of the money-laundering investigation, the ED also initiated an investigation under FEMA against PC Financial Services Pvt Ltd.
"PC Financial Services is a Wholly Owned Subsidiary (WOS) of Olay Digital Services, SA de CV, Mexico, which is, in turn, a WOS of Tenspot Pesa Ltd, Hong Kong which 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 ED said.
"The original Indian Company PC Financial Services was incorporated in 1995 by Indian nationals and got NBFC license in 2002 and after RBI approval in 2018, the owners moved to the Chinese controlled company."
The investigation further revealed that the foreign parent companies of PCFS brought in Foreign Direct Investment (FDI) worth Rs 173 crore for lending business and within a short span of time, made foreign outward remittances worth Rs 429.29 crore in the name of payments for software services received from related foreign companies. PCFS also showed a high domestic expenditure of Rs 941 crore, the ED said.
"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, who own the Opera Group.
"All foreign service providers were chosen by the Chinese owners and the price of the services was also fixed by them," said the ED.
ED has found that exorbitant payments were blindly allowed by the dummy Indian Directors of PCFS without any due diligence and on the instructions of the Country Head Zhang Hong, who directly reported to Zhou Yahui.
"PCFS remitted forex worth Rs 429 crore to 13 foreign companies located in Hongkong, 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 and advertisement fee (of around Rs 66 crore).
"All these services and applications are available in India at a fraction of the cost incurred by PCFS," the ED said.
Moreover, the federal agency said, all the clientele of the NBFC was in India, despite that huge payments were made abroad and no proof of receipt of service is there.
Simultaneously, during the same period of time, PCFS also booked domestic expenditure of similar amount under the same heads of expenditure, said the ED, adding, 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.
Hence, the ED said, PCFS illegally remitted 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.
"Thus, PCFS has contravened provisions of FEMA, 1999, and thus ED after identifying the local assets of the firm has issued an order under FEMA 1999 for seizing the amount of Rs106.93 crore lying in its various Bank accounts and Payment gateway accounts," added the ED.
( With inputs from ANI )
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