The Directorate of Enforcement (ED), which is a law enforcement and economic intelligence agency in India, is conducting an investigation in about 10 cryptocurrency exchanges, which have been reported for laundering over INR 1,000 Crore. It has been indicated that the criminal actions undertaken by the accused companies that are under scrutiny are instant loan application cases, the majority of which have ties to China.
According to certain sources, the investigation has turned up instances in which the accused companies approached the exchanges to purchase cryptocurrencies for over INR 100 Crore and the cryptocurrencies were routed to foreign wallets. Furthermore, the exchanges didn’t perform any requisite effort and didn’t even file a Suspicious Transaction Report (STR).
In the coming week, the Enforcement Directorate (ED) may examine representatives of the cryptocurrency exchanges under scrutiny once again. It has been reported that so far the ED has frozen the Mumbai-based Bitcoin and cryptocurrency exchange, WazirX‘s accounts; several other exchanges have had similar activities, and have been contacted to participate in the investigation.
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WazirX made a statement on Tuesday that it has a zero-tolerance policy for unlawful actions. The firm allows users to sign-up only after they have successfully completed the KYC (Know Your Customer) procedure, which includes providing identification and address proof. WazirX claims that they can supply the relevant user’s KYC information for every transaction.
As per sources, the KYC information collected by the crypto exchanges were frequently found to be questionable. They were often linked to some individuals who didn’t have anything to do with the transactions and lived in distant locations or tier-2 and tier-3 cities. In addition to that, the crypto exchanges assert that by storing the KYC information they were complying with all the regulations, but they did not issue STRs.
Reports have come out saying that these companies had shut down themselves after finding out that they were being monitored, and so made use of cryptocurrency to transfer the money elsewhere. These companies were able to lodge their money overseas thanks to the crypto ecosystem’s opaqueness and the lack of industry regulation. This has made it challenging to investigate the proceeds of crime, determine the type of assets they produced, and trace the eventual beneficiary.