New Delhi: The Enforcement Directorate on Monday said it has detected “major lapses” by several fintech companies as part of a money laundering investigation into a digital arrest case in which two accused have been nabbed.
The probe was initiated taking cognisance of a Chennai police FIR filed on the complaint of a senior citizen who said he lost Rs 33 lakh after he was put under digital arrest by cybercriminals.
A ‘digital arrest’ is cyber scam where fraudsters impersonate law enforcement officials on phone or video calls, and make false accusations on their victims to intimidate them into providing personal information or money. The victims are told they risk being arrested if they fail to obey the frauds.
The federal agency said in a statement it undertook ‘extensive’ searches at over 30 locations across West Bengal, Madhya Pradesh, Uttar Pradesh, Gujarat, and Maharashtra as part of this investigation.
The ED also uncovered “major lapses” by several fintech companies, which “failed” to comply with Know Your Customer (KYC) norms and accepted cash deposits from “bogus” entities and individuals, it said.
These cash deposits, running into hundreds of crores, are suspected to be tainted money originating from digital or cybercrimes, the agency said.
“The role of these fintech companies, their distributors, retailers, and associated bank accounts is being examined,” the ED said.
A “sophisticated” system was being run by the cybercriminals where cash withdrawn from mule accounts was converted into cryptocurrency and transferred to entities suspected to be based abroad.
Significant amounts of funds, originating from various digital fraud schemes, were routed through this method, according to the agency.
It was found that the accused misused cash deposit machines (CDMs) to deposit cash into the bank accounts of companies offering fintech services, it said.
“These funds were then routed to individual accounts, enabling the accused to obtain cryptocurrency. “This cryptocurrency was allegedly used to conceal and transfer the Proceeds of Crime abroad with the assistance of accomplices using foreign phone numbers,” it said.
Multiple mobile phones, laptops, and other electronic devices containing “substantial incriminating evidence” were seized apart from cryptocurrency in the form of BTC and USDT, the ED said.
