FIU steps up AML and CFT compliance for crypto exchanges in India

Indian authorities are actively working to bring all cryptocurrency exchanges operating in India under strict Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) guidelines to increase compliance and oversight in the emerging digital asset market.

The Financial Intelligence Unit (FIU) of the Indian government recently granted the status of Virtual Asset Service Providers (VASPs) in India to two major offshore cryptocurrency exchanges, Binance and KuCoin.

The latest move comes as part of a broader effort to ensure compliance in the virtual asset industry under the Prevention of Money Laundering Act (PMLA).

KuCoin resolved the previous non-compliances with payment of a penalty of Rs 41 lakh (approximately $41,000), following which the ban on websites in India was lifted. On the other hand, according to sources quoted by The Economic Times, Binance is in the process of fulfilling its obligations and is expected to pay a penalty of $ 2 million.

Both exchanges are now registered with FIU-IND, which operates under the Ministry of Finance of India. This registration is in line with the Financial Intelligence Unit’s mandate to monitor the trading of virtual digital assets (VDAs) in the country, which currently includes 47 entities.

As part of its commitment to promote a harmonious virtual presence environment, Bharat Web3 Association (BWA), India’s leading web3 industry body, recently organized a capacity building and training workshop for Virtual Presence Service Providers (VASPs). The event is designed to educate about compliance responsibilities and gather information about the challenges VDAs face.

Shri Vivek Aggarwal, Director, Financial Intelligence Unit-IND, emphasized the importance of adhering to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) guidelines.

“Compliance with Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) framework under PMLA for VDA SPs serving Indian users irrespective of their domicile,” Aggarwal said. It also highlighted that compliance obligations are based on the activities of VDAs rather than their physical presence in India.

The workshop was attended by leading industry players including CoinDCX, WazirX and KuCoin, the first international organization to register. Sessions focused on the dos and don’ts of VASPs and risk-based assessment strategies.

Dilip Chenoy, president of Bharat web3 Association, gave information about the impact of these regulatory measures.

” While compliance comes with costs, the costs associated with non-compliance can be significantly higher. Adhering to AML and CFT protocols is essential as mandated by all Standard Setting Bodies (SSBs) and does not inhibit innovation,” Chenoy told crypto.news.

The President also touched on challenges arising from burdensome tax regulations and ease of doing business (EODB)-related issues that are pushing startups to relocate from the country.

“Our participation in the Financial Intelligence Unit-India Initiative for AML/CFT Partnership (FPAC) and the Indian Reporting Agencies Alliance for AML/CFT (ARIFAC) has strengthened our dialogue and collaborative efforts with other reporting entities, including banks and financial institutions. added Chenoy.

He noted that cooperation includes attending workshops and participating in specialized working groups, such as the Financial Intelligence Unit-led Terrorist Financing Working Group (FWG-STF), which has greatly improved the detection and reporting of suspicious activities in the sector.

The sessions were moderated by leading figures in the Indian crypto compliance industry, including Rohan Bhandari of CoinDCX and Mr. Muthuswamy Iyer of WazirX, who spoke on PMLA Compliance for VASPs.

India was identified as one of the fastest growing cryptocurrency economies globally by a Chainalytic report and has the highest adoption rate by 2023. Binance’s comeback positions it as the second FIU-compliant foreign cryptocurrency exchange to enter this emerging market, following closely behind KuCoin. .

Before the ban in January, Binance was responsible for more than 90% of India’s cryptocurrency trading volume. The platform’s popularity increased as investors tried to bypass tax measures imposed by the Indian government.

Global cryptocurrency exchanges not registered in India reportedly cause tax leakage of INR 3000 Crores (approximately USD 361.45 million) annually. This was one of the key motivations for the Financial Intelligence Unit to ban unregistered remittances in the country.

As part of the Financial Intelligence Unit registration, Binance will now be subject to the same rules as local cryptocurrency exchanges. This includes 1% tax deduction at source (TDS) already implemented by KuCoin in conjunction with Indian crypto exchanges.