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Note On The Mis-Usage of Crypto in The Offence of Money Laundering by The Accused

This document discusses how cryptocurrencies are often misused for money laundering in India. Crypto exchanges in India do not enforce proper KYC norms, allowing accused individuals to obscure their identities and launder money. An example is described of Chinese-controlled fintech apps illegally lending money in India and laundering the criminal proceeds through crypto exchanges by transferring funds anonymously overseas. The case investigation found the accused NBFCs and fintech companies purchased over $64 million of cryptocurrency through WazirX and over $68 million through Flipvolt to transfer funds abroad without revealing the actual beneficiaries.

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akshay kairon
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99 views2 pages

Note On The Mis-Usage of Crypto in The Offence of Money Laundering by The Accused

This document discusses how cryptocurrencies are often misused for money laundering in India. Crypto exchanges in India do not enforce proper KYC norms, allowing accused individuals to obscure their identities and launder money. An example is described of Chinese-controlled fintech apps illegally lending money in India and laundering the criminal proceeds through crypto exchanges by transferring funds anonymously overseas. The case investigation found the accused NBFCs and fintech companies purchased over $64 million of cryptocurrency through WazirX and over $68 million through Flipvolt to transfer funds abroad without revealing the actual beneficiaries.

Uploaded by

akshay kairon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Note on the mis-usage of crypto in the offence of money laundering by the accused

It has been common practice in India that Crypto currencies are being mis-used in the offence
of money laundering and the proceeds so generated is being taken out of the country.
Crypto exchanges in India does not follow any proper Know Your Customer (KYC) norms
which often prompts the accused person/entity to use them into the process of offence of
money laundering. The destination of the crypto exchanges is generally not accessible by the
crypto exchanges which makes its users to easily hide the identity of its actual beneficiaries
and destination which means such crypto may be used for any illegal activities giving rise to
terrorism activity, extortion etc.
One of such example is that:-
This office of Directorate of Enforcement, Hyderabad Zonal Office is investigating a case of
Instant Loan App in the ECIR/HYZO/04/2021 wherein it was found that Fintech companies
which is directly/indirectly controlled by Chinese nationals are infusing funds from outside
India to enter into the business of online lending through mobile applications in association
with the NBFC companies in India which are the only authorised entity which can lend
money. However, by using the license of the NBFC companies, such Fintech companies
entered into the lending business and takes control of all the business activities including
disbursal of loan, collection of processing fees, penalty, interest and repayment of interest.
Thus, such fintech companies without having any proper license enter into the market of
lending and the collection is done without following the norms, rules and regulations made
by the RBI and Government of India. Their repayment is collected by mis-using the data of
borrowers, resorting to intimidation and extortion.
Through this way, they indulge themselves into the offence of money laundering and such
money collected through the intimidation and extortion is nothing but the Proceeds of Crime
as defined under the provisions of PMLA, 2002. After indulging themselves into the offence
of money laundering, the money so generated out of this criminal activity are often sent back
to their original owner i.e. Chinese nationals using various methods. One of such methods is
that such fintech companies opened IDs into the crypto exchanges and from there on, the
funds is infused into such crypto exchanges through the accounts of the actual owner of the
said ID or from the accounts of any other company as the funds can be added from any
account either from actual owner of the ID or from any company/person, then the said fund is
used to purchase crypto currencies from the said exchanges. Thereafter, such crypto
currencies are transferred to different wallets whose exchanges are registered outside India
which means that by bypassing the normal banking channel, such Proceeds of Crime is easily
taken out of India without revealing the identity of the actual beneficiary.
In the instant case, during the funds analysis of various NBFC and fintech companies associated
with the case, it was found that the accused NBFCs and fintech companies have made transactions
with M/s Zanmai Labs Private Limited which maintains and operates “WazirX – Crypto Exchange
Platform amounting to Rs. 64,67,41,053 for the purchase of crypto. However, WazirX did not provide
the details regarding the beneficiary details of the such crypto transfer and the crypto was transferred
to different wallets registered with the exchange outside India. Further, during funds analysis, another
such transaction was observed that M/s Yellow Tune Technologies Pvt. Ltd., a fintech company has
deposited Rs. 5,10,24,08,973 to M/s Flipvolt Technologies Private Limited, a crypto exchange from
its account and from the accounts of other accused companies, and purchased cryptocurrency (USDT-
Tether) worth Rs. 5,08,29,49,188. These cryptocurrencies were never sold but only transferred to 24
different wallet addresses registered with the exchanges outside India.

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