The financial intelligence unit – India (FIU IND) has issued notices for non-compliance to 25 offshore virtual digital asset service providers (VDA SPs) under the Prevention of Money Laundering Act (PML Act), 2002, thereby stepping up enforcement action against such entities.
These offshore VDA service providers include Cambodia-based Huione, Paxful (US), Changelly (Hong Kong), CEX.IO (UK), LBank (British Virgin Islands), Youhodler (Switzerland), and Coinex (Hong Kong).
Consequences of non-registration: App/URL takedown
Further, the director of FIU IND has also issued notices to these entities regarding the takedown of their applications/URLs from public access, as they have been found to be operating illegally in India without complying with the relevant provisions of the PML Act, 2002.
As of now, 50 VDA SPs have registered with FIU IND. However, from time to time, the FIU identifies entities catering to Indian users that remain unregistered and thus outside the AML/CFT framework, and initiates action against them.
Why the crackdown: PMLA obligations for VDA SPs
It is pertinent to note that VDA SPs were brought under the ambit of the Anti-Money Laundering/Counter-Financing of Terrorism (AML-CFT) framework in March 2023, pursuant to the provisions of the PML Act, 2002.
Accordingly, all VDA SPs operating in India—whether offshore or onshore—and engaged in activities such as exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, safekeeping or administration of virtual digital assets, or instruments enabling control over such assets, are required to register with FIU IND as Reporting Entities and comply with the obligations mandated under the PML Act, 2002.