In Bengaluru, six Paytm, Razorpay, and Cashfree locations were searched by the ED last week in accordance with the 2002 Prevention of Money Laundering Act (PMLA). Regarding the investigation of specific merchant IDs and bank accounts belonging to Chinese people, the ED had recovered INR 17 Cr.
Paytm released a statement on the Bombay Stock Exchange alleging that the money did not belong to either the firm or its group entities in response to the raid and the subsequent freezing of accounts.
“As a part of ongoing investigations on a specific set of merchants, the ED has sought information regarding such merchants to whom we provide payment processing solutions. It is hereby clarified that these merchants are independent entities, and none of them are our group entities,” the company said in an exchange filing.
Paytm continued by stating that ED has given the company the go-ahead to freeze some funds from a particular group of merchant companies (those purportedly owned by Chinese people) with Merchant IDs (MIDs).
“It may be further noted that none of the funds instructed to be frozen belongs to Paytm or any of our group companies,” the statement said.
In a statement, ED asserted that the aforementioned entities—the Chinese nationals whose accounts had been frozen—were doing their allegedly illicit business through a variety of Merchant IDs and accounts held with banks [of Paytm, Razorpay, and Cashfree] and payment gateways.
However, these startups do not act as direct loan providers because they lack an NBFC licence. To associate with failed NBFCs, these companies typically build fake businesses. These NBFCs would then work with payment aggregators [such Paytm, Razorpay, and Cashfree] to produce the merchant ID for the lending app, and the aforementioned businesses have denied any involvement with these merchant IDs.