More than Rs. 1000 Crore Seized by ED under PMLA and FEMA Act

The Ministry of Electronics & Information Technology (MeitY) received the list of Digital Lending Apps (DLAs) used by Regulated Entities (REs) of the Reserve Bank of India (RBI) and forwarded it to the appropriate intermediary (App Stores), asking them to make sure that only the apps included in the list are hosted on their app stores. In a written response to a question in the Rajya Sabha today, Union Minister of State for Finance Dr. Bhagwat Kisanrao Karad made this claim.

The Minister explained that under the terms of the PMLA Act, 2002, the Directorate of Enforcement (ED) has been tasked with stopping money laundering through the distribution of illicit loan apps. According to the Minister, ED has opened investigations under the PMLA in a number of situations where accused individuals or businesses created and obtained profits of crime through fraudulent loan applications.

In these instances, the Minister said that as of the date in question, about Rs. 2,116 crore in criminal proceeds had been identified, of which Rs. 859.15 crore had been attached, confiscated, or frozen in accordance with the PMLA. Additionally, under section 37A of the Foreign Exchange Management Act of 1999, assets worth Rs. 289.28 crores have been seized.

The Minister provided additional details, stating that the RBI had released a master circular on Know Your Customer (KYC) standards, Anti-Money Laundering (AML) standards, Combating Financing of Terrorism (CFT), and Banks and Financial Institutions’ Obligations Under the Prevention of Money Laundering Act (PMLA), 2002. According to the Minister, this circular advises banks and financial institutions to follow specific customer identification procedures when opening accounts, monitor transactions of a suspicious nature to prevent their being used for money laundering, and report such transactions to the appropriate authority.

The Minister also mentioned that the RBI had released digital lending guidelines dated 2.9.2022, which advised measures such as, among others, the scrutiny of Loan Service Providers (LSPs), direct loan disbursement from the lender’s bank account to the borrower’s bank account without any pass-through/pool or third-party accounts to avoid layering, and publication of the list of DLAs, LSPs engaged by REs, and details of activities to avoid anonymity.