Ernst & Young probes cashback fraud at Paytm Mall

The Startup staff, in collusion with vendors, created fake orders to siphon off funds.

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This pattern was first found in the annual audit of Paytm Mall’s finances in the wake of steep losses the business had reported, which led to the fraud prevention audit by EY India
BENGALURU: Paytm Mall, which houses the online marketplace business of Paytm Group, has roped in consulting and audit major Ernst & Young (EY) to investigate a cashback fraud involving its staff who created a fake list of vendors, orders and customers to siphon off funds.

Two people aware of the development said some Paytm Mall staff, largely junior to the mid-level, colluded with third party vendors, created fake orders, typically small-sized, involving a certain set of vendors and customer profiles, pilfering cashback offers. The staff received kickbacks for their assistance, said the people cited above.

When contacted by TOI, Paytm Mall, which is backed by Chinese e-commerce giant Alibaba and Japanese investment firm SoftBank, said it’s working with EY “to build a technology-driven fraud prevention system”. An EY India spokesperson did not respond to TOI’s e-mail query till the time of going to press.


“Apart from the administration, finance and other support functions, the company also has a business operations team which works closely with partnered merchants to plan and execute cashback offers & promotions, leaving scope for collusion. The EY partnership will also undertake audit & fraud prevention using both human and artificial intelligence,” a Paytm Mall spokesperson said, while declining to comment on the size or scope of the investigation.

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“These orders were of small sizes to make sure it doesn’t catch the eye of the management for the longest possible time. There was a circle of orders, vendors, and consumer profiles that were essentially circling back to each other many times. Even after losing some money for cancelling orders, the cashback in volumes made significant gains,” a person mentioned above said. This, according to him, would not have been possible without the assistance from vendors who would have to technically process the orders on Paytm Mall.

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This pattern was first found in the annual audit of Paytm Mall’s finances in the wake of steep losses the business had reported, which led to the fraud prevention audit by EY India. For the year ending March 2018, Paytm Mall reported close to Rs 1,800 crore in losses. Paytm was aggressively offering cashbacks on each order to lure consumers. While an initial estimate of loss for Paytm Mall could not be ascertained independently, a management consultant said such audits are typically mandated when the potential of losses would be at least $2 million.
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