India Mandates Crypto Operators To Comply With AML Laws

Updated: 03 August 2023

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What – Some top exchanges, including Coinbase and Binance, have run-ins with regulators over AML compliance, leading to specific platform improvements.
Why – As such, regulators now demand that operators comply with Anti-Money Laundering laws to reduce the occurrence of such incidents.
What Next – Recently, the Indian government has risen to make the AML laws compulsory for all crypto operators within its shores.

The crypto industry has been marked to facilitate money laundering, with many cases to prove it. Now, operators must store users’ transaction data for at least ten years and release the same to the regulators on demand.

Ministry Of Finance Subject Transactions to PLMA 2002

The Ministry of Finance notified the operators of its decision to subject some crypto transactions to the Prevention of Money-Laundering Act (PLMA) 2002. The notification emerged via the Gazette of India.

The specific transactions now subject to the PLMA include safekeeping, transfers, exchange, and administration of virtual assets. Also, other services, such as issuers’ offers and the sale of digital assets, are now under the Prevention of Money-Laundering Act 2002.

Most importantly, the Ministry of Finance mandates that all operators verify their clients’ identities and store their transactions for ten years. These operators must make the records available to regulators when the need arises.

The downside is that the latest development will further disturb the operations of crypto firms in India. These operators have been bearing the weight of the amended tax rules mandating a 30% tax on digital asset holdings and transfers since April 1, 2022.

A Cointelegraph report on April 12, 2022, disclosed that many payment services providers cut ties with major exchanges in the country due to the tax laws. The site also referred to records from an Indian blockchain analytic firm Crebaco showing that ten days after the tax law went into effect, Indian crypto exchanges’ trading volume plummeted by 70%.

Also, the Indian authorities banned crypto ads and sponsorship in February 2023 during the local women’s cricket league. It banned the same earlier during the men’s cricket Premier League in 2022.

Money Laundering Outlook in India’s Crypto Industry

Many countries have risen to prevent the recurrent cases of money laundering in their respective crypto industries by tightening the AML laws. Indian is just one out of others that have taken the stance.

According to Outlook India reports, in March 2022, there were 7 ongoing money laundering cases with crypto in the country. The report noted that the Law Enforcement Agencies (LEAs) received reports of criminal activities with crypto, and the Directorate of Enforcement (ED) was investigating 7 such cases under the PMLA.

Also, in December 2022, Economic Times reported that the ED made 3 arrests relating to money laundering activities by cryptocurrency exchanges. The report disclosed that the ED attached proceeds of crime worth Rs 907 crore to the arrests.

These cases and more reveal the reason for the recent action by the Indian government. According to the notification on March 7, 2023, the aim is to curb the increasing money laundering cases involving crypto transactions in India.

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