Tech

Indian forex authorities probe gaming payment firm Coda

India’s foreign exchange regulator, the Directorate of Enforcement, has investigated Singapore-based Coda Payments in connection with an ongoing operation related to the country’s Prevention of Money Laundering Act (PMLA).

Coda Payments provides services to games developers, app developers, and content streamers, who turn to it to monetize users who may not have credit cards or feel comfortable using them online. The Singapore-based company counts Activision Blizzard, Riot Games, and dating app Tinder among its clientele, with games including Garena Free Fire, Teen Patti Gold, and Call of Duty.

Investors recently sent $690 million the company’s way – a vote of confidence that it can improve on the billions of dollars it is already estimated to process each year, and in its recently established digital goods market.

The Directorate has accused it of making unauthorized deductions from users’ accounts and perhaps corrupting the young.

“The game developers like Garena and Coda Payments India have intentionally designed the payment mechanism in such a way that after first successful transaction, a notification pops up which seeks permission to make subsequent payments without any authentication,” [PDF] stated the Directorate in a press release. The agency added that children in particular do not fully understand the implications of clicking on the pop up and did so in a “routine manner” which then authorized future payments without further interaction or warning.

The raid, however, opened a can of worms. Indian authorities allege they discovered Coda’s Singapore arm was simply a conduit to remit funds outside India.

The Directorate alleged the India-based company was “collecting money in the name of sale of digital content and remitting it to its parent company in Singapore in the name of sale and purchase of digital content. However, the entire operations of Codashop, which sells the tokens, are being managed by Coda Singapore; there is no actual sale or purchase of digital content by [Coda India].”

The India arm allegedly collected $349 million, of which it remitted $277 million overseas – retaining some for tax payment and nominal profits. Indian authorities subsequently froze all of Coda India’s assets, equating to $8.4 million.

Coda Payments is reportedly cooperating with the investigation and have called the allegations “without merit” and a “misunderstanding.”

“Coda’s activities in India have been in full compliance with the law,” said the company.

Coda Payments told The Register its Indian operations “have been in full compliance with the law and we are cooperating with the Directorate of Enforcement’s investigation.”

“These allegations, while without merit, provide an opportunity to clarify this misunderstanding around the nature of Coda’s business.”

The company asserts that misunderstanding flows from the fact it does not process payments.

“widely seen across e-commerce platforms and online marketplaces, end users pay for purchases using payment methods such as e-wallets, UPI, net banking, and credit and debit cards,” the company explained.

“These payments are processed not by Coda, but by the operator of the selected payment method, and as per the Master Direction on Digital Payment Security Controls of Reserve Bank of India the authentication of end users is the responsibility of the concerned payment service providers. We continue to work closely with our payment provider partners to ensure security and compliance to protect our users.” ®


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