Payment Gateways Under Probe for ‘Money Transfers’ to Chinese Apps

A bunch of Indian payment gateway companies are being investigated by the Enforcement Directorate (ED) under prevention of money laundering act for allowing India customers to transfer money to Chinese betting apps. As per the investigations several Indians were betting on Chinese apps and the money was transferred to the Cayman Islands.

Any payment made by Indians to any app or a wallet must be routed through a payment gateway. This would be the first time the ED triggered Prevention of Money Laundering Act of 2002 or PMLA against payment gateway companies.

Investigators have found that payment gateway companies apparently boarded Chinese apps and allegedly allowed processing without adequate due diligence. Investigators are probing the role of Razor pay, the Bengaluru unicorn, in the Chinese betting app case.

 Sleuths have questioned the company over how it allowed Indians to bet on the Chinese app and whether their internal systems raised any red flags. Other payment gateway companies such as Cash free, Paytm, Bill Desk and Infibeam Avenues too were scrutinized by ED.

However, they found that either these companies had not allowed such truncations or in cases when some of them did allow them, the number was limited to one or two transactions, said people aware of the development.

“Some of our merchants were being investigated by the Bengaluru ED. We have cooperated fully and shared all the required information. The authorities were satisfied our due diligence protocols,” a Cash free spokesperson claimed.

“We had categorically informed ED that we did not on-board any such merchants due to our rigorous merchant verification system. We have in-depth transaction level checks via advanced FRISK Systems using AI and machine learning and we reject any suspicious merchant straight away,” an Infibeam spokesperson said. Razor pay, paytm and Bill Desk did not respond to an ET query sent on Friday.

As per the regulations, payment gateways are required to conduct due diligence before processing any transactions to avoid money laundering and slowing the transactions under India’s Foreign Exchange Management Act guidelines.

ED is questioning Indian payment gateways on whether they made money from the whole episode. If they did, the proceeds could be construed as “proceeds of crime.” 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.

Incorporated in the Cayman Islands, Binance has been facing regulatory crackdown as nations intensify scrutiny of the industry amid concerns that cryptocurrencies are being used to conceal proceeds of money laundering, drug dealing and terrorism, the report said. S-ET

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