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The Enforcement Directorate (ED) has issued a show-cause notice to the crypto exchange WazirX and its directors Sameer Mhatre and Nischal Shetty on June 11. The ED has initiated the FEMA investigation for reportedly breaching guidelines in connection with the transactions worth Rs 2,790.74 crore.
Enforcement Directorate Initiates FEMA Investigation Against WazirX
The legal notices issued against the Indian crypto exchange and its directors come under the Foreign Exchange Management Act (FEMA), 1999.
Issuing the notice was followed by the investigation on the basis of an ongoing money laundering probe into illicit online betting apps that are owned by China.
As claimed by the Enforcement Directorate, Chinese nationals had laundered the earnings of crimes worth around Rs 57 crores.
They did so by converting INR deposits into Tether and then transferring them to the Binance Wallet based on the instructions received from abroad.
In addition to this, the agency revealed that via the pool account of WazirX, the users received crypto assets worth Rs 880 crores from Binance accounts.
Following this, the agency revealed that they transferred out digital currencies worth around Rs 1,400 crore to Binance accounts and said:
“None of these transactions are available on the blockchain for any audit/investigation. WazirX does not collect requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines.”
As it can be seen that the users of WazirX have the capability of sending valuable crypto assets to any individual regardless of his location, the agency claimed:
“It was found that the WazirX clients could transfer ‘valuable’ cryptocurrencies to any person irrespective of location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/other illegitimate activities.”
Nischal Shetty in Response to the Show-Cause Notice
The CEO of WazirX, Nischal Shetty, clarified that his firm was yet to receive any show-cause notice from the Enforcement Directorate and said:
“WazirX is in compliance with all applicable laws. We go beyond our legal obligations by following KYC and AML processes and have always provided information to law enforcement authorities whenever required.”
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WazirX is yet to receive any show cause notice from the Enforcement Directorate as mentioned in today's media reports.
WazirX is in compliance with all applicable laws.
— Nischal (WazirX) ⚡️ (@NischalShetty) June 11, 2021
As revealed earlier, the Reserve Bank of India said that it is a must for the banks to carry out customer due diligence in line with the ordinance governing the standards for KYC, AMC, CFT, and obligations of the regulated bodies under the Prevention of Money Laundering Act, 2002.