Crypto exchanges allowed transactions from overseas without complying with KYC, anti-money laundering rules: Report

The Enforcement Directorate (ED) probe revealed that these crypto exchanges have received investments of around $1 billion in the last three years from global capital ventures.

ET Now Digital

Updated Jul 14, 2022, 21:25 IST

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New Delhi: The Enforcement Directorate (ED) has reportedly found that India’s top cryptocurrency exchanges have allowed citizens of several countries including the US, Brazil and Germany to carry out transactions on their platforms without complying with know-your-customer (KYC) guidelines and anti-money laundering (AML) rules.

The probe also revealed that these crypto exchanges have received investments of around $1 billion in the last three years from global capital ventures such as Sequoia, Tiger Global etc. Plus, these investments were not disclosed to the Reserve Bank of India (RBI)-mandated Foreign Exchange-Gross Provisions Return (FC-GPR) filings in many cases.

Worth mentioning here is that whenever a company receives foreign investment and shares are given to a foreign investor, it has to be reported in the FC-GPR filing.

According to a report in Business Standard, the ED investigation also found that Indian cryptocurrency exchanges transferred control of entire deposits of Indian users transacting on their platforms using the wallet system of foreign crypto exchanges without any formal pact between them, which, according to the agency, is “prone to high risk”.

The probe also revealed that leading cryptocurrency exchanges, such as WazirX, CoinDCX and CoinSwitch have facilitated foreign users to convert one crypto to another using third-party foreign exchanges based overseas, such as Coinbase, HitchBTC and earn commission on the same. The investigative agency is probing alleged forex regulations violations by at least 11 crypto exchanges.

“These crypto players are allowing anyone in the world without any identification to execute crypto transactions. When enquired, one of the crypto players said it had captured only internet protocol addresses of users,” the financial daily quotes an unnamed senior agency official as saying.

The publication cited a CoinSwitch spokesperson as saying, “We receive queries from various government agencies. Our approach has always been one of transparency. Crypto is an early-stage industry with a lot of potential. We continuously engage with all stakeholders.”

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