Notice: Beware of Scammer [email protected] is falsely claiming to represent GripeO. Do not pay them for removal services. Contact us directly to report any incidents! – Money Laundering Worth ₹2,791 Crore? | New Edition

The Enforcement Directorate (ED) has issued a show cause notice to for alleged violation of the Foreign Exchange Management Act. The notice is for undertaking transactions worth INR 2,791 crore.

Foreign Exchange Management Act

Foreign Exchange Management Act, 1999 provides Central Government with authority to regulate the monetary flow via a person situated outside the national borders. is the largest cryptocurrency exchange in India. And claims to have more than 20 million users. Its founders are Nischal Shetty, Sameer Mhatre, and Siddharth Menon. The parent organization of WazirX is Zanmai Labs. 

The ED said that it found the transactions during probing illegal online betting applications owned in China. Their show-cause notice is for transactions worth INR 2,790.74 crores. 

ED suspects that might be a haven for money laundering transactions. The show-cause notice is regarding suspicious transactions originating from China.

Moreover, ED’s statement further said that Chinese nationals had laundered proceeds of crime worth about INR 57 crore. They converted INR deposits into cryptocurrency tether. Afterward, ED says that Chinese nationals transferred those funds to Binance Wallets (an exchange registered in Cayman Islands) according to the instructions it received from abroad. 

Enforcement Directorate is a law enforcement and economic intelligence agency in India. It enforces economic laws and tackles relevant crimes. ED is a prominent anti-corruption agency and its recent action against has put the crypto exchange in bad light. 

WazirX claims that it hasn’t broken any laws. It says they didn’t receive the show cause notice and follow AML (Anti Money Laundering) and KYC (Know Your Customer) processes properly. 

Is a Haven for Money Launderers?

Binance is a leading company in the industry and had acquired WazirX in 2019. ED alleges that WazirX allows various transactions with cryptocurrencies including an exchange with INR and vice-versa.

Moreover, they also offer an exchange of cryptocurrencies, P2P (person to person) transactions and transactions of cryptocurrency held in its pool accounts to wallets of other exchanges. Hence, they might be held by foreigners in foreign locations, according to the ED.

Also, ED found that WazirX doesn’t collect the required documents for such transactions, violating mandatory AML and CFT (combating financing of terrorism) norms along with FEMA guidelines. 

Within the period of investigation, according to the ED, their users used its pool accounts to receive cryptocurrency worth INR 800 crores from Binance accounts. And sent out cryptocurrency worth INR 1400 crores.

What’s bothering the ED is that none of those transactions are present on the blockchain. Hence, they are unavailable for investigation. 

Moreover, WazirX users can transfer valuable cryptocurrencies to anyone irrespective of their location and nationality without requiring any proper documentation. According to the ED, this has made a safe haven for money launderers. 

Anti-money laundering guidelines require companies to have proper documentation of transactions. So, if someone uses the company’s funds for illicit activities, agencies can investigate them effectively. 

The lack of proper documentation of any transactions suggests that might have become a money-laundering platform. 

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