Binance-owned Indian exchange WazirX investigated for alleged AML failings

Friday 11 June 2021, 9:26 PM AEST - 4 days ago

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

ED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA, 1999 for transactions involving crypto-currencies worth Rs. 2790.74 Crore.

— ED (@dir_ed) June 11, 2021

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

Law enforcement agents reportedly came across the suspect transactions in the course of a money-laundering investigation into illegal online betting applications, which involved Chinese nationals. The Times cites the ED's explanation, which claims that the accused individuals laundered proceeds from criminal activities worth roughly 57 crore rupees ($7.8 million) by converting their rupee deposits into Tether (USDT). They then allegedly transferred the USDT to Binance wallets, following instructions received from abroad. The ED further claims that:

"In the period under investigation, users of WazirX via its pool account have received incoming cryptocurrency worth Rs 880 crore ($120.4 million) from Binance accounts and transferred out cryptocurrency worth Rs 1,400 crore ($191.6 million) to Binance accounts. None of these transactions are available on the blockchain for any audit or investigation."

The ED contends that WazirX has failed to gather the required information to vet its clients and transactions, in violation of Anti-Money Laundering and Combating Financing of Terrorism laws, as well as FEMA. Law enforcement agents say that the exchange's clients are therefore able to transf ...

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