ED attaches Rs 72.32 cr of Kudos Finance, its fintech partner firms in money laundering case

New Delhi [India], January 12 : The Enforcement Directorate (ED) has attached Rs 72.32 crore lying in various bank accounts and payment gateway accounts of Kudos Finance and Investments Pvt Ltd, an Indian Non-Banking Financial Company (NBFC), and its various fintech partner companies in a money laundering case.
The agency attached the amounts under the Prevention of Money Laundering Act (PMLA), 2002.
ED is conducting money laundering investigation against a number of Indian NBFC companies and their fintech partner Mobile Applications (APPs) which were booked by Telangana Police in multiple FIRs for illegal lending and for using extortionist means to recover exorbitant rate of interest from their customers.
ED investigation revealed that various Indian companies which were flush with investments from China and Hong Kong created Memorandums of Understanding (MoUs) with defunct NBFCs and gave security deposits in the name of 'performance guarantees'.
NBFCs opened separate Merchant IDs (MIDs) with Payment Gateways like Paytm and Razorpay, and allowed these fintech companies to start full scale online lending operations, said the ED.
Against Reserve Bank of India (RBI) guidelines, Indian NBFCs allowed fintech companies to piggyback on their license and do full scale lending in their names.
Mobile apps of the fintech companies were providing unsecured instant micro personal loans for term ranging from seven days to 14 days, said the ED, adding "they used to deduct 15-25 per cent of the loan at the time of disbursement itself in the name of processing fee".
"The rate of interest charged was also exorbitant. Their apps would also capture customers' mobile data by getting various access privileges," the agency said.
In order to obtain more profits, the ED said the fintech firms resorted to harsh recovery measures via call centers.
"Personal data of the customers was misused and calls were made to the friends and relatives of the customers and abusive language was used. Even social media posts were made against the defaulters to shame them," said the ED.
Unable to bear the level of harassment, the ED noted that certain people have committed suicide. "These APPs managed to have a recovery rate of more than 90 per cent and earned huge profits."
The ED said that Kudos Finance and Investment Private Limited is one of such NBFC which did MOUs with 39 Fintech Companies and illegally accepted 'security deposits' from them and allowed them to do lending activity.
"Despite not having Net Owned Funds of more than Rs 10 crore, in complete violation of RBI guidelines, this NBFC (actually its partner Mobile APPs) did lending of Rs 2,224 crore in a short span of time.
"With the help of extortionist type call centres, collectively they generated profits of Rs 544 Crore for the APPs and also earned a commission of Rs 24 crore," the ED said.
The agency said these amounts are nothing but illegal proceeds of crime and are liable for attachment by ED.
ED attached available bank balances in their accounts totalling Rs 72.32 Crore, said the agency.
Earlier in this case, Pavitra Pradip Walvekar, Director-cum-CEO of Kudos was arrested on December 17 last year for the offence of money laundering and is in judicial custody.