MUMBAI -India’s financial crime-fighting agency said on Friday that WazirX, one of the country's largest cryptocurrency exchanges and its directors, were under investigation for suspected violation of foreign exchange regulations.
The investigation comes at time when the Indian government is mulling whether to introduce a law that could ban cryptocurrencies.
The federal Enforcement Directorate (ED) said that the probe involved transactions worth 27.90 billion rupees (US$381.93 million).
The investigation into WazirX - owned since 2019 by Binance, the world's largest digital currency exchange - began when the ED was looking into a money laundering case which involved Chinese owned illegal online betting applications, it said.
During the course of the investigation it was found out that the laundered proceeds of crime worth approximately 570 million rupees had been converted into cryptocurrencies using the Binance platform, the ED said.
"WazirX does not collect the requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines," the agency said.
WazirX said it is yet to receive any notice from the investigating agencies and is in compliance with all the applicable laws.
"We go beyond our legal obligations by following Know Your Customer (KYC) and AML processes and have always provided information to law enforcement authorities whenever required," Nischal Shetty, CEO and Founder, WazirX said.
Separately, other transactions worth 22.80 billion rupees were not recorded on the blockchain platform for any audit or investigation, the ED said, adding that users of WazirX could transfer funds without proper documentation making it a safe haven for those looking to launder money.
"We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we'll fully cooperate in the investigation," Shetty countered.
The government was set to present a bill to parliament by March that proposed a ban on cryptocurrencies, making trading and holding them illegal. But the bill was not tabled in the session and there is uncertainty about the government's plans.
(US$1 = 73.0500 Indian rupees)
(Reporting by Nupur Anand and Aftab Ahmed; Editing by Simon Cameron-Moore and Elaine Hardcastle)