Government Issues PMLA Notice to Offshore Crypto Firms

Subject: Economy

Section: Monetary Policy

Show Cause Notices:

The Financial Intelligence Unit India (FIU-IND) issues show cause notices to nine offshore cryptocurrency and virtual digital assets service providers (VDA SPs).

Non-Compliance with PMLA:

Reason: VDA SPs found non-compliant with the Prevention of Money Laundering Act (PMLA).

Compliance Action:

Request to Block Web Addresses:

FIU-IND requests the Union Information Technology ministry to block the web addresses (URLs) of non-compliant entities.

Role of FIU-IND:

FIU-IND is the national agency responsible for receiving, processing, analyzing, and disseminating information related to suspect financial transactions.

PMLA Requirements for VDA SPs:

Registration Requirement: VDA SPs engaged in activities like exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, and safekeeping or administration of virtual digital assets must register with FIU-IND.
Activity-Based Requirements: Requirements are “activity-based” and not contingent on physical presence in India.

AML-CFT Framework:

VDA SPs were brought under the ambit of the Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework under the PMLA in March 2023.

Regulatory Obligations:

Reporting entities must maintain KYC details, records of documents, and file statements of financial transactions with the tax department.

FIU-IND (Financial Intelligence Unit India):

FIU-IND is the national agency responsible for receiving, processing, analyzing, and disseminating information related to suspect financial transactions.
It operates under the Finance Ministry and plays a crucial role in the Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.
FIU-IND monitors financial transactions to identify and combat money laundering and terrorist financing activities.

PMLA (Prevention of Money Laundering Act):

PMLA is an Act passed by Parliament of India enacted to prevent money laundering and related offenses.
It provides a legal framework to combat money laundering and applies to financial institutions and intermediaries to ensure they follow measures for customer identification, record-keeping, and reporting of transactions.
The Act also designates certain authorities, such as FIU-IND, to oversee and enforce its provisions.

AML-CFT (Anti-Money Laundering and Counter Financing of Terrorism):

AML-CFT refers to a set of regulations and practices designed to prevent and combat money laundering and the financing of terrorism.
It involves implementing measures to detect and deter illicit financial activities, ensuring compliance with regulatory requirements, and enhancing transparency in financial transactions.
Financial institutions, including virtual digital assets service providers (VDA SPs), are subject to AML-CFT regulations to prevent their services from being misused for illegal activities.