Crypto Crackdown: FIU Slams 9 Offshore Exchanges for Money Laundering Fears

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New Delhi: In a sweeping development, the Financial Intelligence Unit (FIU) under India's Ministry of Finance has issued show-cause notices to 9 offshore cryptocurrency exchanges for alleged non-compliance with the Prevention of Money Laundering Act (PMLA), 2002. The exchanges comprise industry giants, among which are Binance, Kucoin, Huobi, Kraken, Gate.Io, Bittrex, Bitstamp, MEXC Global and Bitfinex.

As part of its compliance proposal against offshore entities, the FIU invoked Section 13 of the PMLA and issued a compliance display purpose notice for Virtual Digital Asset Service Providers (VDA SPs). These carrier providers, irrespective of whether they run inside or outside India, are required to register with FIU India as a 'Notifying Entity' and adhere to the prescribed requirements mandated under the PMLA.

The notification specifically states: "The Regulation imposes reporting, file retention and other obligations under the PML on Virtual Digital Asset Service Providers (VDA SPs) which additionally consists of registration with the FIU of India."

Currently, 31 VDA providers have completed registration with FIU India, but several offshore entities, including nine that have received show-cause notices, are said to be avoiding registration, thus falling outside the scope of the Anti Money Laundering (AML) and Counter-Terrorism Financing Framework ( CFT).

In response to the discrepancy, the FIU has approved the Ministry of Electronics and Information Technology (MeitY) to block the URLs of these 9 cryptocurrency exchanges in India. The goal of the permit is to prevent these exchanges from operating inside the United States until they comply with anti-money laundering regulations.

This move follows the inclusion of VDA providers in the AML-CFT framework under the PML Act in March 2023. The government, through the FIU, has emphasized the importance of compliance with reporting, file retention and other obligations imposed on these services. sellers.

The improvement comes at a time when India is in the process of peer review of its anti-money laundering and counter-terrorist financing framework with the help of the Financial Action Task Force (FATF), a UN framework. The government's move to crack down on offshore crypto exchanges is in line with its efforts to strengthen guidelines on cryptocurrency ownership and curb any illegal sports.

Investigative groups also recently discovered evidence that cryptocurrencies were illegally used to move price spreads out of the country. The authorities' tightening of rules includes proposals to withhold supply tax and profit tax to tune up buyers and exchanges operating in the cryptocurrency space. The end results of this crackdown will most likely have a huge impact on the cryptocurrency landscape in India.