Indian authorities freeze $8.1M in WazirX funds as part of AML investigation

Indian authorities freeze $8.1M in WazirX funds as part of AML investigation

India’s Directorate of Enforcement (or ED) has announced that it has frozen approximately $8.1 million of funds and conducted a search related to cryptocurrency exchange WazirX in an investigation into instant personal loans fraud.

The Directorate of Enforcement announced Friday that WazirX was accused of helping unnamed fintech companies “to buy crypto assets and then laundering them abroad” in a scheme involving Chinese-backed businesses circumventing India’s licensing regulations. The ED claimed that WazirX’s bank accounts containing 646.7 millions Indian rupees (roughly $8.1 million at time of publication) were frozen. It also conducted a search for Sameer Mhatre, its co-founder.

The regulator said that the investigation was ongoing. The ED stated that the crypto exchange was not subject to KYC and had “loose regulatory controls” on transactions between WazirX, Binance. They also claimed that the exchange did not keep records of information necessary to verify the source of funds used to buy crypto in the alleged fraud.

“Despite multiple opportunities WazirX failed crypto transactions of suspect fintech APP firms and reveal the KYC for the wallets,” stated the ED.

“WazirX cannot give any account for missing crypto assets. These crypto assets have not been traced. It has encouraged obscurity and lax AML standards, actively supporting 16 fintech companies accused of laundering proceeds of crime via the crypto route.” ED searches WazirX Cryptocurrency Exchange Director and freezes its Bank assets in the amount of Rs 64.67 crore for assisting Instant Loan APP Companies to launder fraud money through purchase & transfer virtual crypto assets.
— ED (@dir_ed), August 5, 2022

Changpeng Zhao, Binance CEO, stated in a Twitter thread that the company did not own equity in Zanmai Labs (the entity operating WazirX, established by the original founders). He said that Binance provides wallet services to WazirX, while WazirX handles KYC.

Related: Indian regulator investigates crypto exchange in probe of alleged violations of forex law

Many companies are now looking to India’s markets after the exodus many Chinese crypto firms following a crackdown. According to the ED, some Indian fintech firms had “piggybacked,” on Indian companies that were licensed as non-banking financial companies to provide lending services to Indians.

In June 2021, the ED also took similar action against WazirX. They ordered WazirX to give cause for transactions involving money-laundering investigations into illegal online gambling applications involving Chinese citizens. Nischal Shetty, director of WazirX, stated that the exchange had “beyond [its] legal responsibilities by following Know Your Customer and Anti Money Laundering processes and have always provided data to law enforcement authorities whenever necessary.”

Cointelegraph reached WazirX but was not able to get a reply at the time of publication.

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