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ED investigating several cryptocurrency-related crimes; proceeds worth Rs 953 crore seized : FM

Proceeds amounting to Rs 953.70 crore from criminal activities involving cryptocurrencies have been seized, frozen or attached under the provisions of Prevention of Money Laundering Act, 2002 (PMLA) and Foreign Exchange Management Act, 1999 (FEMA), finance minister Nirmala Sitharaman said in Parliament on Monday.

She was responding to a question in the Lok Sabha on whether the government was aware of cryptocurrencies being used for money laundering.

“…under FEMA, assets amounting to Rs 289.28 crores have been seized…and show cause notice to cryptocurrency exchange Zanmai Labs Pvt Ltd, known as WazirX, and its directors under FEMA for transactions involving cryptocurrencies worth Rs 2,790.74 crore has also been issued,” she said. The action against WazirX was taken by the Directorate of Enforcement (ED) in 2021.

The finance minister also informed the Parliament that public notices have been circulated by the Reserve Bank of India (RBI) cautioning people regarding cryptocurrencies.

“RBI has been cautioning users, holders and traders of virtual currencies (VCs) vide public notices on 24 December, 2013, 01 February, 2017 and 05 December, 2017 that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection and security related risks,” she noted in her answer.

“RBI, vide its circular dated 31 May, 2021 has also advised its regulated entities to continue to carry out customer due diligence processes for transactions in VCs, in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), obligations under Prevention of Money Laundering Act (PMLA), 2002, etc,” she added.

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Notably, last week, the finance ministry tightened the definition of the Prevention of Money Laundering Act (PMLA) and included cryptocurrencies in the definition of the anti money laundering law. With this, crypto exchanges and intermediaries dealing with virtual digital assets will now be required to perform KYC of their clients and users of the platform. As per the amendments, entities dealing in virtual digital assets (VDAs) will now be considered ‘reporting entity’ under the PMLA.

Entities involved in the exchange between VDAs and Fiat currencies or transfer of VDAs or safekeeping and administration of VDAs, and participation in financial services related to an issuer’s offer and sale of a VDA would be ‘reporting entity’ for the purpose of the PMLA. These entities have also been mandated to keep records of clients for five years even after closing of business.

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