ED investigating into money laundering angle in quick loan disbursal apps

24 Aug 2022 , 10:24 AM

365 fintech companies and their non-banking financial companies (NBFCs) partners are the targets of a protracted money laundering investigation by the Enforcement Directorate (ED), which is believed to have discovered criminal proceeds totaling over Rs800 crore.

These loan apps grew in popularity during the COVID-19 outbreak, when the nation was put under lockdown and many workers in the blue-collar sector lost their employment. These businesses have been investigated for over a year.

People with knowledge of the ED inquiry claimed that these fintech firms provided loans totaling more than 4,000 crore, after which they attempted to recoup the money through telemarketing. The majority of the businesses allegedly borrowed licenses from defunct NBFCs that had been granted by the RBI in exchange for profits ranging from 0.5% to 1%. Investigations have revealed that Chinese funds were used to support the platforms in the majority of these cases.

Chinese nationals had assumed operational or directorship control of the service provider firms and contributed funds to keep these apps operational.

On the condition of anonymity, persons in the know revealed that, of the loans disbursed, these fintechs recovered over Rs 700 crore upfront under the pretense of processing fees and over Rs 85 crore in the form of interest and penalty costs.