Income tax raids in India reveal connection between Hawala and crypto, $2m confiscated

Hawala networks and crypto transactions have emerged as part of a complex money laundering plot that the income tax authorities in Jaipur have uncovered.

The Economic Times reported on Dec. 26 that the Income Tax Department of India had unearthed a multi-faceted nexus involving hawala operators as well as cryptocurrency transactions after it raided a couple of wedding planners in Jaipur. The raids led to the seizure of $2 million, i.e. Rs 20 crores in cash and jewellery, from at least 20 wedding planners in Jaipur. Three crypto wallets linked to the rackets were also seized. Of these, two wallets were linked to local platforms and the third to a major global crypto exchange.

Investigations also found that clients made cash payments that were not reported in exchange for cryptocurrencies like Bitcoin (BTC) and Tether (USDT) through hawala operators in the states of Gujarat and Rajasthan.

Hawala, an unlawful money transfer mechanism, uses brokers to transfer payments abroad without actual money transfer.

The stricter KYC implementation on registered crypto exchanges has made the depositing of hawala-acquired crypto extremely hard. It is suspected that the accused possibly abused exchanges with more relaxed KYC policies or employed intermediaries to exchange cash for checks to buy crypto by means of local exchanges.

Records of these activities, including Whatsapp conversations, emails, and spreadsheets, have been recovered, and a further attempt will be made to ascertain the names of all those who are suspected to have received cash that was not properly reported.

The nexus, officials suspect, extends beyond the borders of Jaipur, with connections to several major cities, including Mumbai, Hyderabad and Delhi. The raids also unveiled a network of resorts, hotel owners, catering and decoration services that permitted customers to make payment either in cash or through banking channels. The authorities are now looking at conducting similar raids in other cities as part of an overall crackdown on unaccountable transactions in the wedding and events industry.