FIU slaps Binance and other crypto exchanges with show-cause notices

Contact Counsellor

Last Updated30/12/2023

The Financial Intelligence Unit (FIU) in India recently issued notices to several cryptocurrency exchanges, including Binance.
The notices pertain to allegations of "operating illegally" in India through offshore entities located in Seychelles, Cayman Islands and Switzerland.
The notices, sent under the Prevention of Money Laundering Act, 2002, highlight concerns related to Anti Money Laundering/ Counter Financing of Terrorism (AML-CFT) compliance.

Cryptocurrency services were brought under the AML-CFT framework in March 2023 under the Prevention of Money Laundering Act, 2002.
Compliance with Indian law is emphasised, and the notices were issued under Section 13 of the Prevention of Money Laundering Act, 2002.

The FIU states that the companies failed to fulfill "reporting obligations" to the Indian government despite catering to a substantial part of Indian users.
Compliance involves reporting suspicious activities, aligning with traditional banking institutions' practices.
While compliance is not solely contingent on physical presence in India, the companies are expected to adhere to reporting obligations and regulatory frameworks.

Out of 31 cryptocurrency firms, several offshore entities catering to Indian users reportedly did not register and comply with AML-CFT requirements.
Compliance is seen as a crucial aspect of ensuring transparency, preventing money laundering and countering terrorism financing.