India Takes Strict Measures Against Offshore VASPs for Non-Compliance

India Takes Strict Measures Against Offshore VASPs for Non-Compliance

India’s Financial Intelligence Unit (FIU) has recently implemented strong measures against nine offshore Virtual Asset Service Providers (VASPs) for failing to comply with India’s Anti-Money Laundering and Counter Financing of Terrorism (AML-CFT) laws. This move marks a significant step forward in India’s efforts to regulate the rapidly evolving virtual asset sector. Major players in the crypto industry, including Binance, KuCoin, and Huobi, have been served Show Cause Notices under the Prevention of Money Laundering Act (PMLA).

The Inclusion of VASPs in AML-CFT Framework

In March 2023, India included VASPs under the AML-CFT framework, showcasing the country’s commitment to regulating the digital asset space. The FIU’s action focuses on entities that operate without proper registration and compliance with the PMLA. These organizations have now been asked to explain their operations in relation to Indian users.

The list of entities issued notices includes well-known global firms such as Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex. These organizations, based in various jurisdictions such as the Seychelles, Singapore, the British Virgin Islands, the United States, Luxembourg, and the Cayman Islands, are now under scrutiny for their dealings with Indian users.

In addition to serving Show Cause Notices, the Director of FIU IND has requested the Ministry of Electronics and Information Technology to block the URLs of these entities due to their illegal operations without adherence to Indian laws. Such actions aim to protect the Indian financial system from unregulated virtual asset transaction risks.

These recent developments highlight the Indian government’s determination to ensure that all VASPs, regardless of their physical presence, comply with local laws when serving Indian users. Currently, 31 VASPs have registered with the FIU and are fully compliant with the AML and CFT framework.

The action against these nine offshore entities sends a clear message about India’s intention to rigorously enforce its financial regulations in the face of the increasing prominence of virtual assets. Compliance requirements go beyond mere registration, including stringent reporting, record-keeping, and adherence to the PMLA.

India’s FIU has taken significant steps to address non-compliance by offshore VASPs with AML-CFT laws. By serving Show Cause Notices and requesting URL blocks, the FIU is demonstrating its commitment to safeguarding the Indian financial system from unregulated virtual asset transaction risks. This move also reinforces India’s stance on ensuring that all VASPs catering to Indian users adhere to local laws. As India continues to evolve its regulatory framework, the focus on compliance and enforcement will remain at the forefront of the country’s efforts to regulate the digital asset sector effectively.

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