India: Binance-acquired WazirX is served with a show-cause notice for allegedly being a “safe haven for money laundering.”

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On Friday, India’s Directorate of Enforcement issued a show-cause notice to Indian crypto-exchange WazirX for failing to comply with FEMA regulations for cryptocurrency transactions of Rs. 2,790.74 crore ($381,862,278 approx.).

The FEMA probe was launched by the ED in response to an ongoing money laundering probe against Chinese-owned unlawful online betting applications.

M/s Zanmai Labs Pvt Ltd was founded in 2017 as a native Indian crypto-startup, and the directors – Nischal Shetty and Sameer Hanuman Mhatre – have been named in the ED’s notification. It should be mentioned that WazirX was bought by global crypto-exchange Binance two years after its inception in 2019.

The ED’s statement highlighted,

“During the course of investigation, it was seen that the accused Chinese nationals had laundered proceeds of crime worth Rs. 57 crore approximately by converting the INR deposits into cryptocurrency Tether (USDT) and then transferring the same to Binance Wallets based on instructions received from abroad.”

According to the investigation agency, WazirX provides a wide range of crypto-related transactions, such as the exchange of CCs for INR and vice versa; the exchange of CCs; Person to Person (P2P) transactions; and even the transfer/receipt of cryptocurrency held in its pool accounts to wallets of other exchanges that may be held by foreigners in foreign locations.

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The ED further claims that WazirX failed to gather the necessary paperwork, which violated the mandated Anti-Money Laundering (ALM) and Combating Financing Terrorism (CFT) standards, as well as FEMA standards.

“In the period under investigation, users of WazirX via its pool account, have received incoming cryptocurrency worth ₹880 crore from Binance accounts and transferred out cryptocurrency worth ₹1,400 crore to Binance accounts. None of these transactions are available on the blockchain for any audit or investigation.”

 

Surprisingly, according to CEO Nischal Shetty, WazirX has yet to get a show-cause letter, despite the fact that the exchange complies with all rules and regulations. He added,

“We go beyond our legal obligations by following Know Your Customer (KYC) and Anti Money Laundering (AML) processes and have always provided information to law enforcement authorities whenever required.”

It is worth mentioning that crypto-regulations in India are currently hazy. A user highlighted the same development by tweeting,

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