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Binance-owned Indian exchange WazirX investigates alleged AML failures

Well-known Indian crypto exchange WazirX, which was acquired by Binance in 2019, is under investigation for alleged violation of India’s Foreign Exchange Act (FEMA). The investigation was publicly announced by India’s Enforcement Directorate (ED) in an official tweet today:

In the Indian numbering system, one crore means 10 million. The cryptocurrency transactions under investigation are worth Rs 2,790 crore, approximately $389 million. According to a report in Times of India, the ED has named the four-year-old exchange and its directors Nischal Shetty and Hanuman Mhatre in show-cause notices.

Law enforcement agents reportedly discovered suspicious transactions during a money-laundering investigation into illegal online betting applications involving Chinese nationals. The Times cites the ED’s explanation, which claims that the accused persons laundered money received from criminal activities to the tune of around Rs 57 crore ($7.8 million) by converting their rupee deposits into Tether (USDT). Following instructions received from abroad, he allegedly transferred USDT to the Binance wallet. The ED further claimed that:

“In the period of investigation, users of WazirX received an incoming cryptocurrency of 880 crore rupees ($120.4 million) through their pool account) Transferred 1,400 crore rupees ($191.6 million) of cryptocurrencies from Binance accounts to Binance accounts. None of these transactions are available on the blockchain for any audit or investigation.”

The ED argues that WazirX has failed to collect information necessary to investigate its customers and transactions in violation of anti-money laundering and terrorism financing laws as well as FEMA. Law enforcement agents state that customers of the exchange are able to transfer crypto to any other person, regardless of jurisdiction or nationality, without the need to provide necessary documents.

WazirX director Nischal Shetty has already responded to the ED’s announcement on Twitter with an extended source:

RELATED: Crypto Exchange Giants Are Entering India Despite Regulatory Uncertainty

In two follow-up tweets, Shetty wrote that WazirX “goes beyond our legal obligations by following Know Your Customer (KYC) and Anti Money Laundering (AML) procedures and always provides information to law enforcement authorities as and when required. is.” He added that the exchange has been able to trace all users of the platform using official identity data.

Shetty concluded his reply by saying that, if the exchange receives a formal communication directly from the ED, it will fully cooperate in the investigation. News of the investigation comes at a time of unexpected crypto regulatory developments in the country, with the most recent reports revealing that authorities are now calling for a blanket bitcoin (BTC) ban in favor of now classifying cryptocurrencies as a separate asset class. Plans may have been abandoned.

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