India’s Enforcement Directorate has reportedly frozen ₹370 in bank accounts linked to a crypto exchange that is currently being investigated for alleged laundering of proceeds from companies operating illegal loan apps. This was made known by officials privy to the case. Nevertheless, officials are yet to disclose the name of the exchange as it is an ongoing investigation.
It won’t be the first time the Enforcement Directorate is freezing bank accounts linked to a crypto exchange. Last week, the central agency reportedly froze the bank accounts of a leading crypto exchange in India. According to a press release from the ED, it recently investigated a director of Zanmai Labs, the company behind popular crypto exchange WazirX. Following a series of ongoing investigations, the central agency issued an order to freeze bank balances up to ₹64.67 crores linked to the director.
The ongoing investigation targets at least ten crypto exchanges in the country accused of allegedly laundering over ₹1,000 crores for companies operating illegal loan app businesses.
The Enforcement Directorate is blaming exchanges for not doing their job correctly and failing to report suspicious transactions. Following covert investigations by ED, the agency has been able to unearth several instances where loan sharks used exchanges to launder ill-gotten wealth. Some transactions show loan sharks buying crypto coins and sending those coins to international wallets.
In its defense, a spokesperson for WazirX stated this week that it is fully compliant with KYC laws and has a robust policy against illegal activities.
How the funds were laundered
The accused loan app companies allegedly leveraged fintech to receive payments and execute payouts. The proceeds from their illegal activities were then used to purchase crypto from exchanges, which they send out to international crypto wallets, adding an extra layer to the funds.
Because the companies were using crypto exchanges to launder the funds, it was challenging to detect. More so, exchanges approved these transactions because accounts used to launder the funds have passed KYC verifications.
Thousands of instant loan apps in India are being investigated by different agencies, including the Ministry of Corporate Affairs, the income tax department, and the ED. This is coming as calls continue to pour in for the proper regulation of instant loan app companies.