FEMA Orders Confiscation of Rs 252 Crore in Assets Linked to Chinese-Controlled CashBean Loan App

The Enforcement Directorate (ED) has ordered the confiscation of assets worth over Rs 252 crore belonging to an Indian subsidiary of a Norwegian company, which is controlled by Chinese individuals. This action is part of a probe under the Foreign Exchange Management Act (FEMA) against a mobile app named CashBean involved in illegal money lending.

Representative image

PC Financial Services Pvt Ltd (PCFS), the Indian subsidiary, is linked to the Norway-based Opera Group. The ED stated that Chinese beneficial owners had overall control of PCFS, which operated in India through its mobile app CashBean. The app was used for lending money to the public.

Illegal Activities and Penalties

The ED revealed that PCFS made remittances amounting to Rs 429.30 crore to related overseas companies under the guise of importing software licenses and services, which were found to be fraudulent. The Reserve Bank of India (RBI) discovered in February 2022 that PCFS charged exorbitant interest rates and other fees to borrowers in a non-transparent manner.

The RBI also found that PCFS misused logos of the RBI and the Central Bureau of Investigation for borrower recovery, violating fair practices. Consequently, the banking regulator revoked PCFS's registration certificate, barring it from functioning as a non-banking financial institution.

Seizure and Legal Proceedings

Initially, in 2021, the ED issued a seizure order for assets worth Rs 252.36 crore, which was confirmed by a competent authority under FEMA in February 2022. PCFS appealed this order before an appellate forum, but a final decision is still pending.

In June 2022, the ED filed a FEMA complaint with the Adjudicating Authority, leading to a show cause notice being issued to PCFS. Although some noticees complied, Zhang Hong, the country head during the contravention period, did not respond or attend personal hearings.

Adjudication and Confiscation

After thorough adjudication proceedings, it was determined that FEMA violations were clearly established against PCFS. Consequently, an adjudication order dated October 7, 2024, mandated the confiscation of properties worth Rs 252.36 crore held by PCFS in India under Section 37A of FEMA.

A penalty exceeding Rs 2,146 crore was also imposed on PCFS. The ED emphasized that these actions were taken following careful examination of alleged violations against written replies and submissions made during personal hearings.

This case highlights regulatory efforts to address financial misconduct involving foreign-controlled entities operating within India. The ED's actions underscore the importance of compliance with financial regulations and transparency in business operations.