CloudSEK Exposes Chinese-Operated Illegal Payment Gateways Fueling Massive Money Laundering in India

From News Desk

CloudSEK, an AI-driven cybersecurity company, has released a whitepaper uncovering a sophisticated network of Chinese-operated illegal payment gateways exploiting India’s digital banking infrastructure.

The report, titled Chinese-Operated Illegal Payment Gateways Exploiting & Laundering in the Indian Financial Network, reveals how transnational criminal syndicates are orchestrating a multi-billion-dollar shadow economy, laundering funds through illicit gateways that facilitate illegal gambling, Ponzi schemes, predatory lending, and digital fraud.

A Parallel Financial Ecosystem Threatening India’s Economy

India’s rapid digital transformation, powered by the Unified Payments Interface (UPI), has revolutionised financial access but also created vulnerabilities. CloudSEK’s research exposes how Chinese-led syndicates are exploiting these gaps, operating illegal payment gateways that bypass Reserve Bank of India (RBI) regulations. These gateways serve as the financial backbone for illicit operations, facilitating the movement of tainted money through a web of “mule” bank accounts to obscure its origins before exfiltrating it via cryptocurrency or hawala networks. (For More Information, Download Full Report)

Key Findings

Massive Scale of Operations A single fraudulent app analysed by CloudSEK facilitated Rs 166 crore in transactions across 398,675 transactions, involving 34,299 unique mule accounts in just 12 months. Extrapolating to an estimated 25 similar apps, the total laundered amount could reach Rs 4,000–5,000 crore annually, with a daily volume of Rs 10–15 crore.
Sophisticated Mule Recruitment Criminals target vulnerable Indians – unemployed youth, students and rural communities – through fraudulent apps, face-to-face agents and “work-from-home” OTP-sharing scams to harvest bank accounts. These accounts are then integrated into advanced dashboards for large-scale money laundering.
Global Reach, Local Impact 40+ countries involved in the illegal payment gateway network. The syndicates operate from Southeast Asia and the Mekong region, using mule accounts from India, Pakistan, Bangladesh and beyond. Funds are laundered through dynamic UPI IDs, cryptocurrency (primarily USDT-Tether) and fake international trade, draining India’s economy and evading taxes.
Diverse Illicit Clients The gateways serve illegal gambling platforms (e.g., Aviator crash games), Ponzi schemes, predatory lending apps, fake stock trading platforms and digital arrest scams, charging transaction fees of 3–10% based on the risk level of the funds.
Tech-Enabled Deception Over 100 Telegram channels promote these gateways, while YouTube tutorials with 37,200+ views guide fraudsters on integrating APIs. Shell companies pose as legitimate fintechs, using paid ads on Google, Facebook and Instagram to whitewash their operations.

Three-Tier Exploitation Model Uncovered

CloudSEK’s research identified three distinct categories of illegal payment gateway clients, each charged different fees based on risk levels –

Gaming & Gambling Platforms (5% deposit, 3% withdrawal fees) – Including illegal casinos and betting apps like crash games
Ponzi & Investment Schemes (7-8% deposit, 4-5% withdrawal fees) – Fake investment platforms promising unrealistic returns
Mixed Scam Operations (10% deposit, 10% withdrawal fees) – Multi-source fraud including loan scams and crypto doubling schemes

The syndicates employ multiple recruitment strategies to acquire Indian bank accounts, including fraudulent mobile applications that request banking credentials and intercept OTP messages, face-to-face agents who target vulnerable populations with cash payments and “work-from-home” schemes where individuals unknowingly serve as human OTP relays.

Technical Sophistication Rivals Legitimate Services

The illegal gateways operate with remarkable technical sophistication, featuring dynamic UPI infrastructure that generates unique QR codes for each transaction, full API integration allowing automated fund collection, global wallet access enabling multi-currency transactions and comprehensive monitoring dashboards for real-time transaction management.

Once funds are collected, they undergo a complex layering process across 7-10 different mule accounts within minutes, making detection and tracing extremely difficult. The final stage involves exfiltrating laundered funds from India through cryptocurrency purchases, traditional hawala networks, or trade-based money laundering schemes.

Real-World Consequences for India

The implications of these findings are profound –

Economic Drain The shadow economy siphons billions of rupees annually, weakening the Indian Rupee and depriving the government of tax revenue.
Financial System Integrity The volume of fraudulent transactions overwhelms bank fraud detection systems, eroding public trust in digital payments.
Social Harm Indian citizens are doubly victimised—first as targets of scams and then as unwitting money mules facing frozen accounts or legal repercussions.
National Security Risks The infrastructure could fund activities against India’s interests, while massive data collection by fraudulent apps poses espionage risks.

The shadow banking system poses significant threats to India’s economic sovereignty, financial system integrity and national security while victimising countless citizens who become unwitting money mules.

We have already reported a total of ~47,000 mule accounts to both Public and Private sector banks since we began extracting and analyzing data from illicit mobile applications. These accounts collectively represent a transaction volume of around ₹250 crore.

A Call to Action

CloudSEK urges immediate, coordinated action to dismantle these networks

Banks and Fintechs Deploy AI-powered monitoring to detect mule account patterns and strengthen KYC for corporate accounts.
Regulators Enforce stricter fintech oversight and issue clear guidelines on mule account liability.
Law Enforcement Build specialised cyber-financial crime units and pursue international cooperation to target syndicate leaders.
Tech Platforms Enhance app vetting on Google and Apple stores to block fraudulent apps.
Public Awareness Launch nationwide campaigns to educate citizens about the risks of sharing OTPs or “renting” bank accounts, emphasizing that acting as a money mule is a serious crime.

“These illegal payment gateways are not just financial crimes; they’re a direct attack on India’s digital economy and citizen trust, Our research arms stakeholders with actionable intelligence to disrupt these networks and protect India’s financial sovereignty,” said Mayank Sahariya, Cyber Threat Analyst at CloudSEK.

“Financial institutions, regulators and law enforcement agencies must move beyond reactive measures to proactive, intelligence-driven strategies. The window for action is narrowing as these networks continue to expand and sophisticate their operations,” Mayank Sahariya added.

CloudSEK continues to monitor these criminal networks and provide actionable intelligence to help financial institutions, regulators, and law enforcement agencies protect India’s digital economy and financial sovereignty.