India’s Enforcement Directorate (ED), the agency responsible for financial crimes, is looking at cryptocurrency exchanges suspected of processing transactions that sent more than 10 billion rupees, or about $130 million, from firms under investigation to international wallets. At least ten crypto exchanges are allegedly involved, according to an official who spoke to The Economic Times, and bank accounts of exchange WazirX have been frozen, the newspaper reported.
Transactions of up to 1 billion rupees, or $1.3 million, were allegedly made in the names of people with no connections to the money by companies under investigation in a case involving instant loans. Thes companies often had ties to China. Even though Know Your Customer/Anti-Money Laundering (KYC/AML) procedures showed the transactions to be suspicious, no enhanced due diligence was performed and no suspicious transaction reports were filed with the ED, the agency claimed.
The ED froze WazirX bank accounts, containing about 647 million rupees or $8.1 million last week, alleging that the exchange had assisted about 16 fintech companies under investigation for money laundering. WazirX released a statement on its blog Tuesday “on behalf of Zanmai Labs Pvt. Ltd,” which, it said, co-operates with WazirX along with Binance, saying that all users are subject to KYC/AML processes and the exchange cooperates fully with law enforcement. “For every transaction, we are able to produce the KYC details of the relevant user,” the blog post said.
The accusations against WazirX have drawn attention to its opaque ownership structure and the role Binance plays in it. Binance CEO Changpeng Zhao (CZ) tweeted Aug. 5 that his company did not complete the acquisition of WazirX announced in 2019. The next day, in an exchange with WazirX cofounder Nischal Shetty, CZ stated, “we asked for transferring of WazirX system source code, deployment, operations, as recently as Feb this year. This was refused by WazirX. Binance do NOT have control on their systems.”
1/ Deal involved Binance Parent entity— Nischal (Shardeum) ⚡️ (@NischalShetty) August 6, 2022
After some media reports on Binance structure, we asked about it
We were given an ambiguous answer that parent entity is under restructuring
It’s been many months, still waiting for Binance Parent entity
Can Binance name Parent entity? https://t.co/5oehKqaTxp
This investigation was not the first time WazirX has been accused of inadequate AML measures. In 2021, WazirX was implicated by the ED in the money laundering of illegal online gambling proceeds, also with a Chinese connection.