Chinese online betting racket busted | India Today Insight
Less than a month after Hyderabad police commissioner Anjani Kumar came out with a report on a Chinese promoted, India-based online sports gambling racket, more details have emerged of an intrepid operation involving massive digital money transactions and money laundering.
The trail has led to some Chinese nationals who floated multiple websites and, with the help of Indian chartered accountants, used digital wallets to send and receive payments worth at least Rs1,200 crore in India and abroad. The digital wallets did not observe due diligence and report the matter even when crores of rupees were being credited and transferred through multiple transactions in the past one year.
Several criminal investigation and finance regulatory agencies have since joined the Hyderabad police probe. A meticulously organised money laundering racket under the garb of online betting, operating across Delhi, Haryana, Maharashtra, Madhya Pradesh and Telangana has come to light. “Had the Telangana government not banned online sports gambling by amending the Gaming Act in 2017, we would not have cracked the Chinese racket,” admits Kumar. In several other states which still allow online sports gambling, the authorities are helpless, one reason why many victims from other states have contacted the Hyderabad police for help to recover their money.
The Chinese ‘invasion’ was well planned. Dummy Indian directors were used to incorporate the companies and, after some time, Chinese nationals travelled to India and took directorship in the same. Locals were used to open bank accounts with HSBC Bank and trade accounts with online wallets, including Paytm and Cashfree. These online wallets had lax due diligence mechanisms and their non-reporting of massive suspicious transactions helped the accused companies launch pan-India operations. Once bank accounts were opened, the internet access credentials were couriered by the Indian employees to China and payment instructions came from the owners who were safely based there.
“During the probe, we found an entity called Beijing T Power was establishing new companies and running online sports gambling operations. Members were admitted only through references while payment was accepted through different e-payment gateways to avoid easy detection of high-value deals,” explains Kumar. Beijing T Power had established several companies like Growing InfoTech Private Ltd, Sily Consulting Services Private Ltd, Pan Yun Technology, Spotpay Technology India, Daisylink Financial and Huahuo Financial to facilitate the activity, which included participants playing online colour prediction games. The colour prediction game is an application where one places money and predicts a colour or colour combination and if the result is correct, the punter wins. “What we have found is that the entire technical operation was run by the China-based directors and partners of these companies while the payments were being routed through India-based payment service providers and gateways. Beijing T Power controlled the different companies,” says Kumar.
The accused companies had also floated more than 500 similar looking websites, most of them hosted through content delivery network (CDN) Cloudflare in the United States. These supposedly ‘e-commerce’ websites attracted gullible people to become members and place bets in online games of chance. Agents were also hired to attract new customers and members and develop a well-knit network. These agents created closed Telegram and WhatsApp based groups and attracted countless Indian customers. Referral codes were used to privately invite new members. This also earned the sponsoring member a commission. Again, Paytm and Cashfree were used to collect money and pay commission to all agent members. Not all websites were activated daily. The information on active websites was shared every day with members using Telegram groups.
Hyderabad police have also found unverified bulk SMSes being shared by various telecom service providers on the request of persons associated with the Chinese firms. They also played a catalytic role in the operation. Many victims clicked on the links shared in the SMS, especially those related to dating apps.
The Enforcement Directorate is now questioning officials of the financial technology companies running the online wallets. They are also examining loopholes in the digital payment gateways that were tapped by the Chinese companies. The authorities have found money deposited being redistributed into hundreds of accounts including ones in China owned by Indian nationals. All financial institutions, including the payment wallets, are required to examine and check the purpose and background of unusually large money transactions and report it to the Financial Intelligence Unit. It’s become clear that nothing like that happened.
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