How the Chinese infiltrated India with loan application fraud

As Nepal continues its crackdown, city cyber cops identify loan app scam masterminds who entered India in 2018 with crores of dirty cash in order to defraud tens of thousands of unsuspecting Indians.

The Mumbai Cyber Cell has issued lookout notices for two Chinese nationals believed to be the masterminds behind the loan app scam that has defrauded lakhs of Indians out of thousands of crores since 2019. After two months of intensive investigation, the police have uncovered the origins and growth of the nationwide loan application scam. Cyber police have discovered that the company was founded in 2018 by a group of Chinese nationals led by Liu Yi. Yi is also on the run in relation to a money laundering investigation being conducted by the Enforcement Directorate. Recently, the Bhubaneswar police have also issued a lookout circular for him.

According to the cyber experts investigating the case, the gang has been active in India since 2019 and gained momentum during the pandemic in 2020. This is the result of extensive reporting by midday that forced the previous government to take notice of the scam and issue directives to both the state and Mumbai cyber cells to launch an investigation. Officers have thus far arrested 14 individuals from various parts of the country while investigating up to 23 cases, which have since been merged, relating to loan application fraud and harassment by loan recovery agents.

How it all began

The senior-most officers of the Mumbai police are expected to hold a press conference today (Friday). However, according to leading news portals or other sources that a detailed investigation of over 200 loan applications led them to two Chinese nationals, Liu Yi and his associate.

According to sources, a group of Chinese nationals led by Yi arrived in India in 2018 and established the network in collusion with Indian nationals. The Chinese nationals had already established businesses in India, which were used to launch the illegal digital lending business. The group reportedly left the country prior to the 2020 pandemic.

Before arriving in India, the accused allegedly created and uploaded loan applications to multiple app stores, including Play Store, according to sources. While fictitious Indian addresses were used to upload the applications, the email addresses were traced to China, Hong Kong, and Macau.

Operations

Instead of establishing call centres in India, the Chinese nationals hired Indian nationals for various positions. Some were hired as supervisors who then hired additional individuals to make calls for loan recovery, while others were hired to morph photographs of borrowers. The investigating officers also discovered that the gang advertised the apps on various platforms, including Facebook, Instagram, and television. The advertisements claimed that loans of up to Rs 20,000 could be obtained in a single click for a weekly interest rate of Rs 400.

An officer stated, “During the pandemic, when many citizens lost their jobs and struggled to make ends meet, business flourished.” In the meantime, the masterminds began investing in Nepal and opening illegal call centres, some of which were busted in Kathmandu and Rupandehi over the past two weeks.

Multiple layers of concealment

According to sources, the money required to operate the scam was sent to India via hawala, and the Chinese nationals’ existing businesses played a significant role. As the digital lending industry began to expand rapidly during the pandemic, the Reserve Bank of India took note and issued digital lending regulations in 2020.

Now, in an effort to leave little to no trace during the transactions and to avoid the scrutiny of investigating agencies, the accused utilised at least 10 to 12 layers for each transaction. According to the officers, the recovered funds are transferred from one UPI ID to another more than ten times before being converted to crypto currency and sent to China. Police have discovered millions of these UPI transactions.

Arrests to date

In the last week of June, cyber police received their first lead in the case and arrested one suspect from Andhra Pradesh, identified as Sudhakar Reddy, who led them to five more suspects in Karnataka. These five suspects then provided the police with information on other suspects in Gurgaon, Manipur, Haryana, and Mumbai.

During the two-month investigation, fourteen individuals from various parts of the country were arrested. Priyanshi Kandpal, 24, one of the accused arrested in Nainital, Uttarakhand, is said to be one of the principal suspects. It was discovered that Kandpal had direct contact with foreign nationals. She was tasked with gathering information from the top supervisors, translating it into Chinese, and transmitting it to the Chinese kingpins.

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