wordpress blog stats
Connect with us

Hi, what are you looking for?

Enforcement Directorate show cause notice to WazirX for crypto transactions worth Rs 2,790 crore

Enforcement Directorate on June 11 issued a show cause notice to WazirX Cryptocurrency exchange under the Foreign Exchange Management Act (FEMA) 1999 for alleged transactions involving cryptocurrencies worth Rs 2,790.74 crore

In a statement issued by the Enforcement Directorate, and verified by MediaNama, the agency said that it initiated the FEMA investigation on the basis of the ongoing probe into Chinese-owned illegal betting applications. The agency also said that the notice was issued to WazirX CEO Nischal Shetty and Co-founder Sameer Hanuman Mhatre.

Nischal Shetty, CEO of WazirX told MediaNama, “WazirX is yet to receive any show cause notice from the Enforcement Directorate as mentioned in today’s media reports. WazirX is in compliance with all applicable laws. We go beyond our legal obligations by following Know Your Customer (KYC) and Anti Money Laundering (AML) processes and have always provided information to law enforcement authorities whenever required. We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we’ll fully cooperate in the investigation.”

Advertisement. Scroll to continue reading.

According to the Enforcement Directorate statement, ED allegedly found that Chinese nationals had laundered proceeds of crime worth Rs 57 crore by converting the INR into crypto-currency Tether (USDT). The same was then transferred to Binance, which is an exchange registered in Cayman Islands “based on instructions received from abroad”.

“In the period under investigation, users of WazirX via its pool account, have received incoming cryptocurrency worth ₹880 crore from Binance accounts and transferred out cryptocurrency worth ₹1,400 crore to Binance accounts. None of these transactions are available on the blockchain for any audit or investigation,” ED said in their statement.

It added that the agency allegedly found that the WazirX Clients could transfer ‘valuable’ crypto-currencies to any person irrespective of their location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/ other illegitimate activities.

RBI circular had asked banks to conduct due diligence on AML, KYC, FEMA

Interestingly, on May 31, the Reserve Bank of India through a notification urged banks and regulated entities to continue carrying out customer due diligence processes in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) and obligations of regulated entities under Prevention of Money Laundering Act, (PMLA), 2002 in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.

This was triggered by emails sent last week by India’s leading banks to their customers, warning them about the risks of investing in cryptos. While HDFC Bank asked customers to provide information as to the nature of certain transactions, SBI Cards and Payments warned its users against buying crypto-currencies on their credit card. Both banks said that if customers do not comply, they would take action.

“This may be another test case before a law in this regard is promulgated. Essentially, the government is looking to audit the trail of crypto transactions that are alleged to be violative of the existing laws. Forensic analysis of many privacy-focused cryptocurrencies is not achievable as they are not based on an open ledger blockchain system. The upcoming law must address such concerns,” Nakul Batra, Associate Partner, DSK Legal told MediaNama.

Advertisement. Scroll to continue reading.

Enforcement Directorate statement regarding the issue

Directorate of Enforcement (ED) has issued a Show Cause Notice (SCN) to Crypto-Currency Exchange M/s Zanmai Labs Pvt Ltd (WazirX), and its Directors Nischal Shetty and Sameer Hanuman Mhatre under Foreign Exchange Management Act, 1999, (FEMA) for transactions involving crypto-currencies worth Rs 2790.74 Crore.

ED initiated FEMA investigation on the basis of the ongoing money laundering investigation into Chinese owned illegal online betting Applications. During the course of the investigation, it was seen that the accused Chinese nationals had laundered proceeds of crime worth Rs 57 Crore approximately by converting the INR deposits into Crypto-currency Tether (USDT) and then transferring the same to Binance (exchange registered in Cayman Islands) Wallets based on instructions received from abroad. WazirX allows vide range of transactions with Crypto-currencies(CCs) including exchange of CCs with INR and vice-versa; exchange of CCs; Person to Person (P2P) transactions; and even transfer/receipt of Crypto-currency held in its pool accounts to wallets of other exchanges which could be held by foreigners in foreign locations. WazirX does not collect the requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines. In the period under investigation, users of WazirX via its pool account, have received incoming Crypto-Currency worth INR 880 Crore from Binance accounts and transferred out Crypto-Currency worth INR 1400 Crore to Binance accounts. None of these transactions are available on the blockchain for any audit/investigation. It was found that the WazirX Clients could transfer ‘valuable’ crypto-currencies to any person irrespective of its location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/ other illegitimate activities.
********

Also read

Update, June 11, 7 pm: The statement of the Enforcement Directorate that was attributed to several reports was verified by MediaNama, and the copy has been accordingly updated. A copy of the statement also has been added at the end of the copy.

Written By

Among other subjects, I cover the increasing usage of emerging technologies, especially for surveillance in India

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

Views

News

Find out how people’s health data is understood to have value and who can benefit from that value.

News

The US and other countries' retreat from a laissez-faire approach to regulating markets presents India with a rare opportunity.

News

When news that Walmart would soon accept cryptocurrency turned out to be fake, it also became a teachable moment.

News

The DSCI's guidelines are patient-centric and act as a data privacy roadmap for healthcare service providers.

News

In this excerpt from the book, the authors focus on personal data and autocracies. One in particular – Russia.  Autocracies always prioritize information control...

You May Also Like

News

Google has released a Google Travel Trends Report which states that branded budget hotel search queries grew 179% year over year (YOY) in India, in...

Advert

135 job openings in over 60 companies are listed at our free Digital and Mobile Job Board: If you’re looking for a job, or...

News

Rajesh Kumar* doesn’t have many enemies in life. But, Uber, for which he drives a cab everyday, is starting to look like one, he...

News

By Aroon Deep and Aditya Chunduru You’re reading it here first: Twitter has complied with government requests to censor 52 tweets that mostly criticised...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Name:*
Your email address:*
*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ