The authority to provisionally attach property under anti-money laundering statutes extends to any person in possession of proceeds of crime, regardless of their status as an accused in the predicate offence, and financial institutions cannot outsource core decision-making functions to third-party entities to circumvent regulatory requirements.

1. The appeal has been filed under Section 26 of the Prevention of Money Laundering Act, 2002 (‘the Act of 2002’) challenging the order dated 22.08.2022 passed by the Adjudicating Authority confirming the provisional attachment order (PAO no. 02/2022 dated 12.01.2022.

2. The present case arises out of large-scale complaints regarding illegal instant loan mobile applications operating across India. On 29.12.2020, the Directorate of Enforcement, Hyderabad Zonal Office, received information from Cyber Crime Police Station, Rachakonda that several FIRs have been registered against entities running digital loan applications. During investigation, certain accused persons were arrested from the office of Jiya Liang Infotech Pvt. Ltd., Pune, which was functioning as a recovery call centre for various instant loan apps. It was found that the company had entered into arrangements with several other entities for providing tele-calling and recovery services in relation to unsecured personal loans sanctioned through mobile applications.

3. The appellant NBFC, along with multiple fintech companies operating through mobile loan applications, adopted a structured and deceptive lending model designed to lure financially vulnerable borrowers into a recurring debt trap. These mobile applications targeted individuals in urgent need of money by offering instant small-ticket loans with minimal documentation, fast approval, and quick digital disbursal. The ease of access and promise of immediate funds particularly attracted underbanked, low-income, and financially distressed persons who lacked access to formal banking channels. Once the borrower downloaded the application, extensive permissions were compulsorily obtained, including access to contacts, photographs, media files, location, identity documents, bank details, and other personal data stored on the mobile device. Without granting such permissions, the borrower could not proceed with the loan application. Borrowers were then required to upload Aadhaar, PAN, photographs, and banking details, thereby giving the operators full access to sensitive personal information.

4. After approval, the sanctioned loan amount was not fully disbursed. Large sums were deducted upfront in the name of processing fees, platform charges, GST, and similar heads. In many cases, deductions ranged from 15% to 25% of the sanctioned amount. For example, against a loan of Rs.10,000/- the borrower might receive only Rs.7,500/-. Despite receiving a reduced amount, the borrower remained liable to repay the full principal along with further interest, penalties, and additional charges. The nominal rate of interest was projected as lawful, the actual effective rate became exorbitant because substantial charges were recovered in advance on very short-duration loans, usually for 7 to 14 days. By repeatedly charging upfront fees on successive renewals or fresh loans, the effective annualized rate allegedly rose to extraordinarily high levels, even exceeding 1500% in some cases. When borrowers failed to repay on time, coercive recovery mechanisms were activated through call centres and tele-callers engaged by the fintech entities. Borrowers were subjected to repeated threatening calls, abusive language, humiliation, circulation of defamatory message