ED Catches Leading Crypto Exchanges Flouting KYC, Anti-Money Laundering Norms

SUMMARY

Top crypto exchanges facilitated transactions from other countries without complying with KYC and AML rules

While the crypto exchanges received funds from global VC firms, many of the investments have not been filed under FC-GPR filing

In addition, the probe also found that the crypto exchanges used wallet infra-structure of foreign crypto exchanges

Under its ongoing investigation against leading cryptocurrency exchanges, the Enforcement Directorate (ED) has found that top exchanges have not complied with the know-your-customer (KYC) regulations and anti-money laundering (AML) norms properly.

As per a Business Standard report, top crypto exchanges facilitated transactions from other countries without complying with KYC and AML rules.

While the crypto exchanges received funds from global VC firms such as Tiger Global, Sequoia in the last three years, many of the investments have not been filed under the Reserve Bank of India ‘s (RBI) foreign currency-gross provisional return (FC-GPR) filing.

A company is required to fill FC-GPR form with RBI for reporting of the issue of eligible instruments to the overseas investor against any FDI inflow with an e-Biz portal of Government of India.

In addition, the probe also found that the crypto exchanges used wallet infra-structure of foreign crypto exchanges. Even leading exchanges such as WzirX, CoinDCX, CoinSwitch earned commission by facilitating foreign users’ request to convert one crypto into another by using third-party exchanges based out of India.

While the crypto players are allowing crypto transactions without any identification, one of the crypto players said it had captured only internet protocol addresses of users during enquiry, a senior agency official said as quoted in the report.

Earlier this month, the agency sent notice to leading exchanges and sought further details and documents from crypto exchanges as part of its probe in the alleged instances of foreign exchange violations.

“We receive queries from various government agencies. Our approach has always been that of transparency. Crypto is an early-stage industry with a lot of potential and we continuously engage with all stakeholders,” a CoinSwitch Kuber spokesperson told Inc42 earlier.

More importantly, crypto exchanges are not only being probed by the ED but also the Income Tax Department and the GST Commissionerate, industry sources said earlier.

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