Loan Sharks Hunt Prey in Digital Waters
Illegal financial technology (fintech) companies still roam freely, even though the government has blocked 947 unlicensed applications and websites offering loan facilities. As soon as one is banned, another emerges.
JAKARTA, KOMPAS — Closing down illegal fintech applications and websites will not have the intended deterrent effect without firm law enforcement measures. Kompas has found that many banned online loan services are continuing to operate under new names and logos.
The Cashstore application was blocked on 27 July 2018, and then changed its name to Cashcash. The government blocked the application for a second time on 13 Feb. 2019. The Investment Alert Task Force’s data shows that software developer Firestorm-sea created both applications.
Other software developers have changed their names after the government blocked their applications. Kompas’ investigation shows that one such software developer, Angel Cash, remains active although the government blocked it.
A former credit analyst at an illegal fintech company, AN, 24, said that the companies could continue to operate such applications because of outstanding loans, which remained a lucrative business even after the fintech applications were blocked.
Fake addresses
Unlike legal fintech companies, illegal online loan sharks employ unusual practices. Many fintech businesses that the government has blocked, for instance, do not have valid business names or addresses.
Many use free email domain hosting services and use random combinations of letters and numbers in their email addresses.
Upon investigating the list of illegal fintech companies that had been shut down by the Financial Services Authority (OJK) and the Finance Ministry, Kompas found that 787 companies used fictitious physical addresses, making it difficult to track them down. Only 16 companies had listed their actual company names and addresses.
Kompas recently attempted to track down some of these illegal companies. Among them was PT Masyarakat Sejahtera Maju (MSM), the developer of the Welbi application. The OJK’s list shows that PT MSM is located at Gedung Setiabudi 2 on Jl. HR Rasuna Said, South Jakarta. However, a visit to the building revealed that no one had any information on PT MSM or Welbi. Several other illegal fintech companies, like the developers of the Tuku Kas and BANKKU applications, also used fake addresses.
Tuku Cash, the developer of Tuku Kas, had listed its address as Jl. Tomang Raya, Palmerah, West Jakarta. However, no such company was found at the location.
The BANKKU application had listed its address as Jl. Kali Besar 49K, Jakarta, which turned out to be a fictitious address: Jl. Kali Besar has no lot numbered 49K.
Overseas servers
The Investment Alert Task Force found that 178 illegal fintech companies used servers in Indonesia, another 122 companies used servers located in the US, 81 in Singapore, 49 in China and the rest in other countries. The locations of 323 other servers used by illegal fintech companies are unknown.
Investment Alert Task Force chair Tongam L. Tobing said that fintech companies operating in Indonesia must have offices and servers located in Indonesia.
“We are concerned that they are just looking to gain profit from members of the public without contributing to economic growth,” said Tongam.
The public are the primary victims of illegal fintech companies. Several illegal online loan sharks were found to have employed illegal means to collect debt payments. Among these loan sharks is PT VCard Technology Indonesia, which developed the VLoan application in cooperation with Chinese investors.
IS, 31, who worked as a VLoan debt collector, is a defendant accused of spreading pornographic content in the course of his job. He claims that he had no idea that the company he worked for was illegal. IS was also shocked to learn that he was named in the company deed as a commissioner.
Tongam said that Chinese fintech companies were targeting Indonesians.
Meanwhile, the number of fintech companies in China has been on the declien. The South China Morning Post reported on 15 April 2019 that only 1,027 online loan businesses were operating in China in the first quarter of 2019, down by half from 2,163 in the same period last year.
The decline was the result of the Chinese government taking a firm course of action against fintech businesses, after many were found to be using the infamous Ponzi scheme in their peer-to-peer lending facilities.
Tongam said that many Chinese fintech players sought to enter the Indonesian market due to the tighter regulation and saturated market in China.
Indonesian Fintech Lenders Association (AFPI) chair Kuseryansyah said that the numerous problems connected to illegal fintech companies had affected licensed fintech companies. The illegal companies had created a poor image of online lending, which had raised concerns among the public about applying for loans from legal fintech businesses. (BKY/IGA/ILO)