India’s Enforcement Directorate is conducting an investigation against ten cryptocurrency exchanges allegedly involved in laundering more than 1 billion rupees, equivalent to more than $125 million in digital currency.
According to The Economics Times, the exchanges (which have not yet been identified) were used by several companies accused of money laundering to make cryptocurrency purchases of more than 100 million rupees that were then sent to other international wallets, mostly linked to mainland China.
Exchanges Had a Poor Control of Their Users’ Activity
In addition, the sources noted that the exchanges collected KYC data of dubious provenance, as the tracked accounts belonged to people living in remote areas “with no connection to the transactions.”
However, the exchanges claimed they were in compliance with KYC regulations, despite not producing any suspicious transaction reports (STRs) that could have yielded any information about presumed money laundering.
Therefore, the failure to comply with the measures required by regulators made it more difficult to trace the account, which upon learning of the investigation, proceeded to withdraw their funds and log off, according to sources close to the investigation.
“Once these firms learned that they were under the scanner, they shut shop and used the crypto route to siphon the funds abroad. The opaque nature of the crypto ecosystem and the industry not being regulated provided the requisite cover for these firms to park their assets offshore,”
Binance And WazirX Crypto Exchange In India’s Crosshairs
As CryptoPotato recently reported, Binance and WazirX are in the ED’s crosshairs, following several Twitter spats between the CEOs of both companies over ownership and regulatory non-compliance by WazirX.
Following the two companies’ spat, the ED froze WazirX’s bank accounts holding more than $8 million, alleging that the exchange had “actively” aided in the money laundering of more than 15 fintech companies.
For its part, Binance said in response that they expect WazirX to “take full responsibility for its operations and users’ funds,” stressing that the global crypto exchanges has nothing to do with WazirX’s operations.
Although the ED is investigating several cryptocurrency exchanges for money laundering, according to an industry executive that talked to the Economic Times, the exchanges are the second point of failure in these crimes, as the money goes in and out primarily from traditional banks which also did little to nothing to trace the funds, which is why “it wasn’t caught at the banking level.”
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