Prior to the latest activity, the exchange was investigated in 2021 over money laundering allegations related to illegal online gambling income linked to Chinese companies. Many of these fintech companies engaged in illicit lending practices have been backed by Chinese funds, the investigative agency added. (bit.ly/3zArOBV) Government sources said the WazirX episode had brought many issues to the forefront and that the urgency was investigating the matter. In 2021, the ED investigated a money laundering case involving illegal Chinese-owned online betting apps. During the investigation, it was found that the laundered products worth about 570 million rupees were converted into cryptocurrencies via the Binance platform, the ED said. In India, the ED unearthed more than 4 trillion rupees of illegal transactions in 2021. Step 1: Illicit funds are funneled to the financial system through intermediaries such as stock exchanges, institutions, shops and even casinos. You can buy cryptocurrencies in cash or with other cryptocurrencies through exchanges. In general, they aim for less compliant exchanges, which helps them cover their tracks. However, the exchange said it has no tolerant attitude towards illegal activities on the platform. In addition, he said that most of the users targeted in the emergency investigation have already been flagged as suspicious by WazirX and blocked in 2020-2021. Step 3: The last step is when the illegal money is pumped back into the system. Another popular way to launder money via crypto is through over-the-counter (OTC) brokers.
They are intermediaries between buyer and seller. There are over-the-counter reports involved in money laundering for which they are also paid heavily. ED`s allegations against WazirX claimed it had processed $130 million in money transfers to wallets under investigation for illegal activities. In light of the allegations, Binance, which previously attempted to acquire the company in 2019, distanced itself from the stock market via a public statement from CZ on Twitter. Step 2: At this point, the criminal wants to hide his illegal source of funds through structured transactions. For example, crypto exchanges allow criminals to convert one crypto asset into another. Criminals can also move their digital currency to another country. Binance`s CEO distanced himself from trading on the WazirX exchange, while the Indian company said it was considering legal action against Binance.
“Zanmai Labs Pvt Ltd has taken legal action against the case in question and denies all allegations of wrongdoing,” WazirX said. He also pointed out that the ED has issued similar notices to several crypto exchanges in the past. These issues have been raised against the platforms for violating various laws. While the Law Enforcement Directorate (ED) removed the WazirX crypto exchange and froze its bank balances, the company issued a statement on Tuesday saying it has a zero-tolerance policy towards illegal activities. “WazirX is a platform partner of Zanmai Labs Pvt. Ltd (Zanmai Labs) and Binance. Zanmai Labs has no tolerance policy towards illegal activities with WazirX. Users agree (in the Terms of Use) to use WazirX in accordance with applicable law. Users will only be logged into WazirX after completing the KYC process, including filing proof of address and identity,” the company said in a statement. Finance Minister Nirmala Sitharaman has pushed for global regulation of cryptocurrencies to address the risks of money laundering and terrorist financing.
However, the regulation of crypto-assets and their intermediaries is complex. WazirX told Cointelegraph that the case was still under investigation, but the funds had not been released due to suspicious activity, with “no further comment at this time”. “We have been cooperating fully with the Law Enforcement Directorate for several days and have responded to all their requests in a comprehensive and transparent manner,” said a spokesperson for WazirX, one of the largest virtual currency exchanges in India. The agency said its action was related to the investigation into the crypto exchange`s alleged role in helping instant lending app companies launder the proceeds of crime by converting them into cryptocurrencies on its platform. The Law Enforcement Directorate (ED) investigated allegations of money laundering against WazirX. Meanwhile, New York Department of Financial Services (DFS) Superintendent Adrienne Harris fined Robinhood Crypto, LLC (RHC) $30 million for failing to comply with New York State rules regarding the Bank Secrecy/Anti-Money Laundering Obligations Act (BSA/AML) and cybersecurity laws and regulations. Speaking to India Today, WazirX explained the transaction marked by ED. A few days after ED`s action, a public dispute broke out between the CEO of global cryptocurrency platform Binance, Changpeng Zhao, and WazirX co-founder Nischal Shetty. Funds in WazirX bank accounts had been frozen since 5 August, when the executive director initially announced the investigation. Frozen funds totalled over $8.1 million. “This is commonly referred to as off-chain transactions, which means that it occurs outside the blockchain and is an internal transfer (in different wallets of the same user) that occurs via the Binance WazirX bridge,” WazirX said.
“These transactions are at the discretion of the particular user making them, and Wazirx has no role to play,” they added. MUMBAI, 5. August (Reuters) – India`s Financial Crime Agency said on Friday it had frozen the assets of WazirX, which is linked to the world`s largest digital currency exchange, Binance, as part of its investigation into an alleged violation of foreign exchange regulations. Referring to a blog post still active on Binance`s website announcing the acquisition of WazirX by the exchange, Zhao said the deal was never completed. While crypto has brought a renaissance in the way we view property, it has also brought the evil winds with it. Money laundering is one of them. There are three steps in how money is laundered. Similarly, crypto laundering “puts crypto exchanges in a vulnerable position because they don`t know what procedures they should use to prevent them from facilitating the acquisition of assets derived from the proceeds of crime,” he added.
Speaking to India Today, Udai Walia, Partner at Touchstone, explained how the lack of comprehensive regulatory guidance is leading to a lot of complexity in the crypto industry.