Govt notice to 9 offshore cryptocurrency platforms for non-compliance under PMLA

India’s Financial Intelligence Unit (FIU), which falls under the purview of the Ministry of Finance has issued show-cause notices to 9 offshore cryptocurrency platforms under the stringent Prevention of Money Laundering Act (PMLA). Those served with the show-cause notice include big-ticket virtual digital assets platforms like Binance and Kucoin. The notices are issued for non-compliance with the anti-money laundering legislation, news agency PTI reported on Thursday.

The FIU has also written to the Ministry of Electronics and Information Technology to block the URL of these entities as their operations in India are illegal in compliance with PMLA provisions.

The nine cryptocurrency exchanges served with the notices are Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global and Bitfinex. The FIU cleared that the compliance mandate in the PMLA provisions is activity-based and does not require a physical presence in India.

“As part of compliance action against the offshore entities, Financial Intelligence Unit India (FIU IND) has issued compliance Show Cause Notices to the following nine offshore Virtual Digital Assets Service Providers (VDA SPs) under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA),” the ministry said in a statement.

Mandatory registration as a ‘Reporting Entity’

Digital asset service providers, whether operating within or outside India’s borders, and involved in activities such as converting between digital assets and traditional currencies, transferring digital assets, safeguarding or managing digital assets, or utilizing instruments that grant control over digital assets, must undergo registration with the Financial Intelligence Unit India (FIU IND) as a ‘Reporting Entity.’ Additionally, they are obligated to adhere to a specified set of responsibilities outlined in the Prevention of Money Laundering Act (PMLA) of 2002.

Moreover, the ‘Reporting Entity’ must file statements of financial transactions (SFT) with the Income Tax department disclosing certain financial transactions or any reportable account maintained by them during the year.

The government decided to bring in virtual digital assets service providers under the ambit of Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework in March this year and so far 31 VDA SPs have registered with FIU.

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