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Mumbai: Indian cryptocurrency exchanges have been told by the government to keep an extra eye out for transactions linked to persons located in Jammu & Kashmir and border areas. The Financial Intelligence Unit (FIU-IND), the central agency dedicated to curb money-laundering and financial crimes, communicated this to several local crypto platforms last week, two persons aware of the advisory told bourses are directed to particularly watch out and report trades involving 'private wallets' that allow managing of virtual digital coins without relying on third parties like exchanges or crypto regular banking channels are to be avoided in making payments to dubious actors, terrorists, or their handlers, cryptos, moved from an exchange wallet to a private wallet, can be directly transferred to the private wallet of the payee through a blockchain network. Under the circumstances, exchanges will have to keep tabs on withdrawals from exchange wallets to private wallets as well as deposits from them. As per the instructions, exchanges for the time being would focus more on crypto trades by persons in the border locations and report them to FIU, than the regular STR trades, said a person requesting anonymity due to the confidential nature of the communication. Just as banks share data with FIU, STR, or 'suspicious transaction report', refers to regular filing of information on suspicious trades and activities by crypto exchanges with central the past one year, exchanges have restricted free withdrawals of cryptos, insisting on enhanced due diligence of customers-enquiring about the identity of beneficiaries and the purpose of withdrawals to private wallets. The safeguards, though not fool-proof, have been put in place as it is widely perceived that cryptocurrencies can be used for illicit purposes, thanks to their pseudonymous nature and the relative ease with which they can be moved across borders. For instance, privacy coins like Monero or Zcash, which have greater privacy and anonymity, can be misused. Though these coins are not listed on Indian bourses, theoretically, a person can purchase a common and universally accepted crypto like USDT, transfer to its wallet with an exchange outside India, and then swap them for privacy coins before making payments. Such transactions would not leave a trail that Indian law enforcement agencies can track easily, said an industry person. Indeed, ever since Binance, one of the world's largest crypto exchanges, has been registered with FIU-IND, many crypto users have been transferring part of their coin holdings to Binance wallets run from other countries. Some of the exchanges are allowing coin withdrawals once they verify that the Binance wallet belongs to the customer. But, once cryptos are moved to Binance, they can be transferred, swapped freely, or paid to anyone. Since regulations are unclear and applicability of foreign exchange laws are ambiguous in crytos, platforms find it tough to fully clamp down on such transfers once the account holder ticks the necessary boxes, said a source. 121123098SEBI SEEKS AIF DATAThe Securities & Exchange Board of India reached out to trustees of private equity and venture capital funds-also known as alternative investment funds (AIFs)-last Friday to evaluate risks related to money laundering, terrorist financing and proliferation financing. Among other things, the trustees were told to ask the funds houses whether they had identified the beneficial owners while on-boarding clients. AIFs are required to find out the last natural persons behind entities which own 10% or more in an investor (like companies, partnerships etc). While this could well be part of the usual regulatory drill, large AIFs have been asked to disclose the percentage of 'high-risk customers', 'percentage of clients from countries in the list prepared by the Financial Action Task Force (FATF), the global anti-money laundering body, and proportion of clients on internet-based transactions.
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