FIU enhances AML and CFT adherence for Indian cryptocurrency exchanges
Indian authorities are actively working towards imposing strict Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) guidelines on all cryptocurrency exchanges operating in the country. The Financial Intelligence Unit (FIU) of the Indian government has recently granted Binance and KuCoin, two major offshore cryptocurrency exchanges, the status of Virtual Asset Service Providers (VASPs) in India. This move is part of a broader effort to ensure compliance in the virtual asset sector under the Prevention of Money Laundering Act (PMLA).
KuCoin has resolved its previous non-compliance issues by paying a penalty of INR 41 lakhs (approximately $41,000), resulting in the lifting of the ban on its websites in India. On the other hand, Binance is in the process of settling its liabilities and is expected to pay a $2 million fine, according to sources cited by The Economic Times. Both exchanges are now registered under FIU-IND, which operates under the Indian Ministry of Finance. This registration aligns with the FIU’s mandate to oversee the trading of virtual digital assets (VDAs) in the country, which now includes 47 entities.
To promote a compliant virtual asset environment, the Bharat Web3 Association (BWA), India’s leading web3 industry body, recently organized a capacity-building and training workshop for VASPs. The workshop aimed to educate participants about compliance responsibilities and gather insights on the challenges faced by VDAs. Shri Vivek Aggarwal, Director of FIU-IND, emphasized the importance of adhering to the AML/CFT guidelines and highlighted that compliance obligations are based on VDAs’ activities rather than their physical presence in India.
The workshop featured participation from prominent industry players such as CoinDCX, WazirX, and KuCoin. The sessions focused on the dos and don’ts of VASPs and risk-based assessment strategies. Dilip Chenoy, chairman of the Bharat Web3 Association, highlighted the implications of these regulatory measures, stating that while compliance incurs costs, the expenses associated with non-compliance can be significantly higher. Chenoy also addressed challenges arising from burdensome tax regulations and issues with ease of doing business, which are prompting startups to relocate from India.
Chenoy added that the association’s involvement in FIU-INDIA Initiative for Partnership in AML/CFT (FPAC) and the Alliance of Reporting Entities in India for AML/CFT (ARIFAC) has enhanced dialogue and cooperative efforts with other reporting entities, including banks and financial institutions. He mentioned that participation in workshops and specialized working groups, such as the FIU-led Working Group on Terror Funding (FWG-STF), has greatly improved the detection and reporting of suspicious activities within the sector.
The sessions were led by prominent figures in the Indian crypto compliance sector, including Rohan Bhandari of CoinDCX, who spoke about PMLA Compliance for VASPs, and Mr. Muthuswamy Iyer from WazirX. India has been identified as one of the fastest-growing cryptocurrency economies globally, with the highest adoption rate as of 2023, according to a Chainalysis report. Binance’s return positions it as the second FIU-compliant foreign cryptocurrency exchange to enter this growing market, closely following KuCoin.
Before its ban in January, Binance accounted for over 90% of India’s cryptocurrency trading volume. The platform’s popularity surged as traders sought to evade the tax measures enforced by the Indian government. Unregistered foreign exchanges reportedly caused an annual tax leakage of INR 3000 crores (approximately $361.45 million). This was one of the key motivators for the FIU to ban such exchanges in the country. As part of the FIU registration, Binance will now be subject to the same rules as local cryptocurrency exchanges, including a 1% tax deduction at source (TDS), which has already been implemented by KuCoin and Indian crypto exchanges.
