Major crypto exchanges under ED probe for flouting KYC, anti-money laundering rules – ET BFSI
exchanges under ED probe for flouting KYC, anti-money laundering rules”>
The Enforcement Directorate (ED) has found that top Indian exchanges have not complied with the know-your-customer (KYC) regulations and anti-money laundering (AML) norms properly.
The exchanges facilitated transactions from other countries without complying with KYC and AML rules, according to a report.
Many of the investments have not been filed under the Reserve Bank of India ‘s (RBI) foreign currency-gross provisional return (FC-GPR) filing.
The FC-GPR form is for reporting of the issue of eligible instruments to the overseas investor against any FDI inflow with an e-Biz portal of the government.
The probe found that crypto exchanges used wallet infrastructure of foreign crypto exchanges. Leading exchanges such as WazirX, CoinDCX, CoinSwitch earned commission by facilitating foreign users’ request to convert one crypto into another by using third-party exchanges based out of India.
One of the crypto players said it had captured only internet protocol addresses of users during inquiry, according to the report.
‘Withdrawal from crypto wallets’
Enforcement Directorate, in its recent notice to WazirX, has asked the country’s largest crypto exchange to explain why ‘withdrawal from crypto wallets’ is not a violation of the Foreign Exchange Management Act (FEMA).
The ED notice has put a question mark on the very essence of cryptos and fundamental structure of the underlying digital ledger, blockchain, that allow holders of cryptos to freely transfer coins from their wallets to another wallet and to anyone, anywhere in the world. The agency had asked WazirX to explain transactions worth 2,790.74 crore.
A trader buying Bitcoin, the most popular cryptocurrency, on WazirX stores the coin in her wallet with the exchange. However, she can move the crypto purchased on WazirX platform to another wallet with another exchange in India or abroad, or to her private wallet which is not linked to any exchange, or directly move coins to the wallet of another person who may be located anywhere.
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The FC-GPR form is for reporting of the issue of eligible instruments to the overseas investor against any FDI inflow with an e-Biz portal of the government.
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