Enforcement Directorate (ED) is investigating a number of Indian payment gateways, including Paytm, under the Prevention of Money Laundering Act, reports ET. These payment gateways are allegedly allowing Indian customers to transfer money to Chinese betting apps.
According to investigations, many Indians bet on Chinese apps. The money was then transferred to the Cayman Islands. Indians are required to route any payment to an app or wallet through a payment gateway.
This is the first time that the ED has triggered the Prevention of Money Laundering Act of 2002 against payment gateway companies that are operating in India.
Payment Gateways Investigation: Big Picture
- Investigators discovered that payment gateway companies had apparently boarded Chinese apps, and allowed them to proceed without proper due diligence.
- Investigators are currently investigating the role of indian startup unicron Paytm in the Chinese betting app case.
- Investigators have probed the company to see if it allowed indian users the opportunity to place bets on the Chinese app, and whether any red flags were raised by their internal systems.
- Paytm is another payment gateway company which is under the lens. ED is also examining Cashfree, Infibeam Avenues and Bill Desk in this regard.
- ED, however, discovered that these companies did not allow such truncations, or, in the cases where they did, it was restricted to one or two transactions. This is according to people who were aware of the developments.
- According to the current regulations payment gateways in India must conduct due diligence prior to processing any transaction to avoid money laundering or slowing down transactions, as per the guidelines issued by FEMA.
- ED is asking Indian payment gateways if they made any money from the entire episode. The proceeds of the crime could be considered if they did.
- Investigators have also questioned Binance Holdings on whether it had any role to play in the investigation involving betting apps, Bloomberg reported on June 11.
- Binance, which was established in the Cayman Islands, has faced regulatory crackdowns as a number of countries intensify their scrutiny of the industry amid concerns about cryptocurrencies being used to hide proceeds of money laundering and drug dealing.
- In this context, the ED is also investigating WazirX, a cryptocurrency trading platform ownd by Binance. ED sought explanations from the exchange for transactions in the amount of Rs 2,790.74 Crore, which the agency claimed were in violation FEMA’s foreign exchange rules.
- In December last year, PayPal India was slapped a fine of Rs 96 lakh for hiding suspected financial transactions.
Food For Thought:
The digital revolution in India has given birth to a lot many new age Indian payment gateways that rely solely on investors’ money. Their yearly losses, amounting to hundreds of crores of rupees, are mounting with each passing year due to intensifying competition in the market. Most of these payment gateways in India are backed by Chinese investors who invest a huge sum with some hidden agenda.
As Indian payment gateways are under lens now, we won’t be surprised if all of this exercise lead ED to a pandora box.