WazirX Investigated for alleged AML failings

Binance-owned cryptocurrency exchange WazirX, registered under the company named Zanmai Labs Pvt and incorporated in December 2017 is being investigated for suspected involvement in money laundering and alleged violations of India’s foreign exchange act by India’s regulators.

Why India’s Enforcement Directorate is investigating WazirX

India’s Enforcement Directorate (ED) announced in a tweet on the 11th of June that it was issuing a Show Cause Notice to WazirX. “ED has issued Show Cause Notice (SCN) to WazirX Cryptocurrency Exchange for contravention of FEMA, 1999 for transactions involving crypto-currencies worth Rs. 2790.74 crore ($381.93 million),” the tweet read.

The four-year-old exchange headquartered in Mumbai was found to not have been doing its due diligence and complying with KYC requirements. Agents of the law enforcement body reportedly came across some rather suspiciously looking transactions during an investigation on a money laundering case that involved illegal betting platforms owned by Chinese Nationals. These betting applications reportedly laundered proceeds of criminal activities worth approximately 57 crore rupees ($7.8 million). The rupee deposits were said to be converted into Tether (USDT) on Binance wallets.

The ED says: “In the period under investigation, users of WazirX via its pool account, have received incoming cryptocurrency worth Rs 880 crore ($120.4 million) from Binance accounts and transferred out cryptocurrency worth Rs 1,400 crore ($191.6 million) to Binance accounts. None of these transactions are available on the blockchain for any audit or investigation.”

The ED says that WazirX is in violation of Anti-Money Laundering and Combating Financing of Terrorism laws, as well as FEMA by failing to collect the required information to vet its clients and transactions carried out by its clients. An estimated 27.9 billion rupees (€314 million) is said to be what the total probe is worth.

In his response to the ED’s announcement in a tweet on Twitter, Nischal Shetty, the CEO and Co-Founder of WazirX denied any wrongdoing while also implying that his company was ready to cooperate fully with the investigation. He said, “WazirX is yet to receive any show cause notice from the Enforcement Directorate as mentioned in today’s media reports. WazirX is in compliance with all applicable laws.” 

WazirX not recording all transactions?

In response to the agency’s accusation that WazirX does not properly record transactions on the platform for auditing and investigation purposes citing 22.8 billion rupees ($311 million) that weren’t recorded, Shetty in follow up tweets 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.”

Shetty added that because of the exchange’s following of the KYC and AML protocols, they are therefore able to monitor every user on the platform using official identity data.

This investigation is coming at a time when the government of India is considering a blanket ban on all forms of cryptocurrencies that would prevent trading and holding. A bill proposing the ban of cryptocurrencies was set to be presented to parliament in March but it wasn’t tabled in the session and now there is a feeling that authorities are in favour of putting cryptocurrencies in the class of distinct assets.

Sign up on our website to benefit from pro research and analysis for free and gain a significant market advantage with TradeDog.

Follow us on social media by clicking on the icons on top of this blog 😊

    Get Daily Crypto Insights

    Stay ahead of the crypto game with Tradedog's exclusive research
    subscribe now for valuable insights and expert analysis

    Related Posts