Following an investigation into possible violations of the Foreign Exchange Management Act, the ED has issued a show cause notice to WazirX.com. The notice covers transactions totaling INR 2,791 crore.
The most active Indian cryptocurrency exchange is WazirX.com. And it boasts a user base of over 20 million. Nischal Shetty, Sameer Mhatre, and Siddharth Menon are its creators. WazirX’s parent company is called Zanmai Labs.
According to the ED, the transactions were uncovered during an investigation into Chinese-owned unlawful online gambling apps. For activities totaling INR 2,790.74 crores, they have been issued a show-cause notice.
WazirX.com has been flagged as a possible money laundering refuge by ED. The show-cause letter pertains to questionable financial dealings initiated in China.
The ED further alleged that Chinese nationals have laundered roughly INR 57 crore in criminal profits. Deposits in Indian Rupees were changed into tether, a cryptocurrency. According to ED, it got orders from outside the country to have the cash moved to Binance Wallets (a Cayman Islands-based exchange).
The Enforcement Directorate is India’s national agency for economic intelligence and law enforcement. Its primary purpose is to prevent and punish violations of economic law. The latest move taken by the major anti-corruption agency ED against the cryptocurrency exchange WazirX.com has cast a negative light on the company.
According to WazirX, it has not broken any laws. It states that they did not get the show cause notice and fully implement AML and KYC procedures.
Is It True That Money Launderers Use WazirX.com?
In 2019, Binance, a market leader, bought the cryptocurrency exchange WazirX. According to ED’s claims, users of WazirX can buy and sell cryptocurrency, convert it to and from INR, and conduct other types of cryptocurrency-related activities.
In addition to facilitating trades between different cryptocurrencies, P2P transactions, and transfers of cryptocurrency from its pool accounts to the wallets of other exchanges are also available. Therefore, according to the ED, they could be in the hands of foreign nationals in foreign territories.
WazirX was found to violate AML and CFT (combating the financing of terrorism) rules as well as FEMA requirements because it does not collect the necessary papers for such transactions, according to ED.
The ED claims that during the period of investigation, users of their pool accounts received cryptocurrencies from Binance accounts totaling INR 800 crores. And dispersed 1400 billion Indian Rupees’ worth of cryptocurrency.
The issue for the ED is that none of those transactions can be found on the distributed ledger. That rules them out as potential witnesses.
To add, WazirX users can send valuable cryptocurrency to anyone, regardless of where they live or what country they belong to, and without providing any identification. The ED claims that because of this, WazirX.com has become a refuge for criminals looking to launder money.
Businesses must keep detailed records of all financial dealings to comply with anti-money laundering regulations. That way, authorities will be able to probe those responsible, should they use corporate cash for illegal purposes.
WazirX.com may have turned into a money-laundering platform due to the lack of sufficient documentation of any transactions.
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