ED seizes Chinese-controlled NBFC funds of Rs 131 cr for foreign exchange law violation


The Law Enforcement Directorate said on Thursday it had seized more than 131 crore rupees from an NBFC belonging to a Chinese national for alleged violation of the foreign exchange law.

The non-bank financial corporation (NBFC) is PC Financial Services Pvt Ltd and its business was to provide instant personal micro-loans through its “Cashbean” mobile app for suspicious foreign remittances.

This case went under ED’s radar in a separate money laundering investigation against a number of NBFC and FinTech companies that are linked to instant personal loans providing mobile apps.

These loans were distributed at a “high interest rate and recovered by illegally using the client’s personal data and threatening and abusing them through call centers.”

The alleged illegalities of these apps have been reported in a number of states over the past year, particularly in the wake of economic stress from the COVID-19 lockdown, and a number of people have reportedly been pressured to end the their days because of the extortion and intimidation of these “dubious” companies.

“PCFS is a wholly owned subsidiary (WOS) of Oplay Digital Services, SA de CV, Mexico, which in turn is a WOS of Tenspot Pesa Limited, Hong Kong, which is owned by Opera Limited, based in the Cayman Islands, and to Wisdom Connection I Holding Inc, which are ultimately beneficially owned by Chinese National Zhou Yahui, ”the general manager said in a statement.

The original Indian company PCFS was incorporated in 1995 by Indian nationals and obtained the NBFC license in 2002 and after RBI approval in 2018, the ownership was transferred to the Chinese controlled company.

PCFS, ED alleged, “illegally” remitted huge funds outside India under the guise of non-existent software imports and marketing services to park the funds overseas and hold them in accounts related foreign companies.

“Thus, PCFS has violated the provisions of the Foreign Exchange Management Act (FEMS). RBI has been made aware of the above contraventions,” he said.

The ED seized a total of Rs 131.11 crore of funds held in various bank and payment gateway accounts, under FEMA provisions.

It also seized funds worth Rs 106.93 crore from the same NBFC in August.

Probe found that the foreign parent companies of PCFS brought in FDI (Foreign Direct Investment) of Rs 173 crore for lending activities and, in a short period of time, made outward remittances of 429 crore. , 29 crore rupees on behalf of payments for software services received from related companies. foreign companies, he said.

“The PCFS also showed high domestic spending of Rs 941 crore. A detailed survey of foreign spending paid by the NBFC found 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 the foreign service providers were chosen by the Chinese owners and the price of the services was also set by them,” he said.

Exorbitant payments were blindly authorized by “fictitious” Indian directors of PCFS without any due diligence and on the instructions of country leader Zhang Hong, who reported directly to Zhou Yahui, a resident of China, he said.

PCFS, he said, handed over currency of Rs 429 crore to 13 companies located in Hong Kong, China, Taiwan, United States and Singapore as payment for the license fee for the application. mobile Cashbean (Rs 245 crore per year), software technical fees (around Rs 110 crore) and online marketing and advertising costs (around Rs 66 crore).

“All of these services and applications are available in India for a fraction of the cost incurred by PCFS,” the DE said.

In addition, all of NBFC’s customers were in India, despite huge payments being made overseas and no proof of service receipt provided, he said. .

During the same period, the director general said, the PCFS also recorded domestic expenditure of a similar amount under the same expenditure headings.

“PCFS management did not provide any justification for these expenses and admitted that all remittances were made to move money out of India and park it overseas in corporate accounts in the group controlled by the Chinese promoter, “he said.

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Posted on: Thursday September 30th, 2021 6:53 PM IST


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