Hyderabad: In a significant move, the Enforcement Directorate (ED) has slapped a staggering fine of Rs. 2,146.48 crore on PC Financial Services Private Limited (PCFS), marking a first for a loan app company facing such a hefty penalty. This action comes in light of the company’s violations of the Foreign Exchange Management Act (FEMA).
PCFS, a subsidiary of the Norway-based Opera Group, was found to have Chinese nationals as its ultimate beneficiaries. The company operated an illegal lending business through its app, CashBean, which charged exorbitant interest rates to borrowers. Investigations of ED's Hyderabad unit revealed that PCFS paid approximately Rs. 429.3 crore to foreign entities under the guise of importing software licenses, raising red flags about the legitimacy of its operations.
The ED had previously confiscated the company’s movable and immovable assets worth Rs. 252.36 crore in 2021 after uncovering fraudulent activities. In February 2022, the Reserve Bank of India (RBI) flagged PCFS for collecting excessive interest based on forged documents that bore the logos of RBI and the Central Bureau of Investigation (CBI), leading to the cancellation of its non-banking financial registration.
The ED issued a show cause notice to PCFS on June 22, 2022, allowing the company to respond regarding the confiscation of its assets. However, the then-country head of PCFS, Zhonghung, failed to provide any satisfactory explanation. After reviewing the company's written submissions, the ED determined that substantial FEMA violations had indeed occurred.
The recent imposition of this monumental fine signals the ED's commitment to cracking down on illegal financial practices and safeguarding the interests of consumers. As investigations continue, it serves as a stern warning to other entities involved in similar fraudulent activities.
