India’s Enforcement Directorate (ED) has conducted searches on one of the Directors of Zanmai Lab Pvt. Ltd., owner of the popular cryptocurrency exchange WazirX. The authority has also frozen the company’s bank balances of ₹646.7 million ($8.12m).
ED’s action is a part of its ongoing money laundering investigation against numerous Indian non-banking financial companies (NBFC) and their fintech partners for predatory lending practices wherein tele-callers misuse personal data and use abusive language to extort high interest rates from the loan takers. After the criminal investigation began, many of these fintech apps have shut down and diverted their illicit gains to purchase crypto-assets and then launder them abroad. Most of the funds were diverted to WazirX exchange and the crypto-assets purchased by the criminals have been diverted to unknown foreign wallets.
However, prior to July 2020, WazirX did not maintain records of the bank accounts from which funds were coming into the exchange to purchase crypto-assets. The company also failed to perform physical address verification on its clients’ source of funds. No enhanced due diligence was conducted and no suspicious transaction reports were submitted either.
Moreover, the Director of WazirX exchange did not cooperate with the authorities when asked to share the details of the linked illicit transactions, despite having complete remote access to the company’s database. By not following stringent AML/CFT procedures, WazirX actively helped around 16 accused fintech companies in laundering the proceeds of crime via cryptocurrency. Therefore, ED has frozen equivalent movable assets of over $8.12m.
Source: Enforcement Directorate, India