ED quizzes senior Paytm executives over due diligence in betting scam

This follows the money laundering case filed by ED on Saturday against entities, including Dokypay Technology and Linkyun Technolgy, for allegedly running illegal online betting apps linked to China

The Enforcement Direc­to­rate (ED) has grilled senior officials of financial technology company Paytm, including the chief financial officer, for failing to exercise due diligence while facilitating remittances of companies involved in online betting scam.

This follows the money laundering case filed by the agency on Saturday against entities, including Dokypay Technology and Linkyun Technology, for allegedly running illegal online betting apps linked to China. The agency had also frozen four HSBC Bank accounts of these firms.

“The questioning happened earlier this week. Paytm officials were asked to join the probe after we began looking into the loopholes and gaps in digital wallets’ payment gateways that were being misused by certain Chinese companies to remit money abroad,” a senior ED official privy to the probe said.

An email sent to Paytm’s spokesperson on Tuesday went unanswered, despite reminders.

The ED is likely to summon officials of HSBC Bank and other payment wallets, including Cashfree and Razorpay, to join the investigation. “Transaction details are already being sought from the bank and other institutions,” the official said, adding they are contacting the Financial Intelligence Unit (FIU) to check whether they obtained any information related to these transactions.

According to norms, all financial institutions, including payment wallets, are required to examine and check the purpose and background of all unusually large transactions that have no apparent econom­ic or visible lawful purpose, and report the same to the FIU.

The probe agency alleged that some of the companies run by Chinese nationals had floated multiple websites and used these wallets to send and receive payments worth Rs 1,200 crore in India and abroad.

Sources said the digital wallets did not report even when crores of rupees were being credited and transferred through multiple transactions in the past one year.

Meanwhile, the ED red flagged the matter with the Reserve Bank of India, particularly the risks involved with payment wallets.

The ED, while analysing bank accounts of Dokypay, allegedly found Rs 1,268 crore was collected in one year. Of this, Rs 300 crore came through Paytm’s gateway and about Rs 600 crore was transferred out. 

Outward foreign remittances for payments worth Rs 120 crore were allegedly made from the accounts of Linkyun.

ED officials said that after opening multiple bank accounts, internet access credentials were couriered by Indian employees to China and payment instructions came from the beneficial owners who were safely ensconced in China. Accused companies floated numerous similar-looking websites, hosted through Cloudflare, US. Agents were then hired to catch new members through closed Telegram and WhatsApp groups to place bets on online apps that promised attractive rewards. A first information report on the scam was first registered by the cybercell unit of Hyderabad Police.