Government issues notices to 25 offshore crypto firms for non-compliance of money laundering law

Financial Intelligence Unit-India, under the Ministry of Finance, has issued notices to 25 offshore virtual digital asset providers, including British Virgin Islands-based LBank and BingX that feature among top 20 crypto exchanges in the world, for non-compliance with norms under the Prevention of Money Laundering Act.

The government has also instructed these entities to take down their applications/websites from public access in India, the ministry said in a statement on Wednesday.

The government had in 2023 brought virtual digital asset providers under the ambit of its law on money laundering.

"It must be mentioned that the Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions," it warned.

To date, 50 virtual digital assets service providers (VDA SPs) have registered with FIU IND, it said.

However, it said, from time to time the entities which are catering to Indian users but not getting registered and thus remain outside the AML/CFT framework are identified by the FIU IND.

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The VDA SPs operating in India (whether offshore or onshore) and engaged in activities like exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets etc are required to be registered with FIU IND as Reporting Entity and comply with the set of obligations as mandated under Prevention of Money Laundering Act (PMLA) 2002.

These obligations are activity-based and are not contingent on physical presence of the entity in India, it said, adding, the regulation casts reporting, record keeping, and other obligations on the VDA SPs under the PML Act which also includes registration with the FIU IND.