A recent case has again highlighted how a large number of Chinese firms in India use dummy Indians to send thousands of crores of rupees back to China, the Economic Times (ET) reported.
Reportedly, these Chinese-owned firms make money through various kinds of scams and also regular businesses. One such case is of Oda Class, a successful Bengaluru-based ed-tech startup. This company is a Chinese-owned firm and the Enforcement Directorate (ED) is now investigating it under the Foreign Exchange Management Act (FEMA) for remitting money back to China.
According to the ED, Oda Class remitted around Rs 82 crore to China in the name of marketing expenses.
The firm is owned by Pigeon Education Technology and came up during the Pandemic. The company's website says that they have tutored 700,000 students.
The ED investigation revealed that all the affairs of the company were controlled by a Chinese citizen, Liu Can.
And the Indian director actually had no power and only followed the instructions from the Chinese.
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There have been reports of a spurt in the number of Chinese scammers since the Covid-19 Pandemic, which caused widespread use of various kinds of apps and other digital technology, especially for money transfers.
Here's how these scammers operate:
Apps and digital payment systems are the most preferred methods by these Chinese scammers. From investment to micro-lending, jobs, and betting, they operate through firms registered in India with dummy Indian directors or using stolen data to establish such firms.
They lure consumers using social media, with promises of instant loans or quick and big gains on investments.
Many investment apps offer quick returns initially or instant loan transfers to consumers to get access to phone data and more users. Once they have gained sufficient numbers, these apps disappear.
Some loan apps start threatening to make the borrower's morphed nude picture public or send them to his contacts to extract money.
Some Chinese apps offered jobs of liking videos on social media for which the users were paid handsomely. These apps required the applicants to deposit a fixed sum of money before the job was offered. These apps disappeared after gaining money from these users as deposits.
Many chartered accountants (CAs) have invited the scrutiny of the Institute of Chartered Accountants of India (ICAI) for helping these scammers.
A few NBFCs reportedly created dummy entities in India that were used by Chinese entities for lending activities. Some CAs and company secretaries allegedly certified the documents for these entities without conducting proper due diligence.