10 crypto exchanges under ED radar for laundering more than Rs 1,000 crore

New Delhi: In a major operation to unearth alleged connection between suspicious fintech firms and crypto exchanges, the Enforcement Directorate (ED) is probing at least 10 exchanges for alleged money laundering to the tune of Rs 1,000 crore.

ED is considering this whopping Rs 1,000 crore laundering as ‘proceeds of crime’ of the accused firms in the Instant Loan App case. Most of these firms are said to have China connection.

In the ED probe, it has come to light that these accused firms approached the crypto exchanges to buy crypto coins of over Rs 100 crore, which would be sent to international wallets. The complicity of exchanges in the crime is being probed as they didn’t conduct any due diligence and failed to raise suspicious transaction report (STR), Economic Times reported, quoting people privy to details.

China backed fintech firms & their ‘secret operation’

A couple of Non-Banking Financial Corporation (NBFC) companies are already under the ED lens over their instant app-based loan facility. It is understood that fintech companies backed by Chinese funds have entered into agreement with these NBFC companies and are providing instant loans to borrowers.

ED found that large amount of funds were diverted by the fintech companies to purchase Crypto assets and then the money was laundered abroad.

These fintech companies, under the guise of providing technical support & customer service facility to NBFCs, entered the lending business and are now ‘controlling’ the entire lending process. These fintech companies developed their own Instant loan App, did MoU with the defunct NBFCs and started using their lending licence for loan disbursal. It is this ‘clandestine partnership’ & fintech firms making a moolah out of loans, that the ED swung into action and started investigation. These fintech firms linked to Chinese funds would impose steep interest & late fee, would mint money but paid just small commission to NBFCs for using their licence.

Cryto exchange top officials to be quizzed

The ED sleuths are likely to question officials of crypto exchanges next week.

Last week, the ED froze the bank accounts & Rs 64.67 crore assets of WazirX, India’s leading crypto exchange. It conducted searches in the premises of directors of M/s Zanmai Lab Pvt Ltd, which owns WazirX and asked it to join the probe in coming days.

WazirX is not alone, whose ‘illicit’ transactions under the scanner of investigative agencies. In a couple of cases, the KYC details collected by the crypto exchanges are found to be dubious & shady. In many cases, the KYC details & transactions had no links as the customer was found to be living in some Tier – II or Tier – III cities.

In other cases, where KYC norms was formed, the crypto exchanges didn’t inform about dubious or suspicious transactions.

Clarifying over the row last week, WazirX said in a statement, “Users are signed up on WazirX only after they complete the KYC process, including submitting proof of address and identity.”