ED is conducting money laundering investigation against numerous Indian NBFC firms and their fintech partners “for predatory lending practices that violate the Reserve
guidelines and by using callers who misuse personal information and use foul language to extort high interest rates from the borrowers.”
ED said that since the investigation began, it found that a large amount of money was being diverted by fintech companies to buy crypto assets and launder them abroad. The enforcement agency said the maximum amount of funds were diverted to the WazirX exchange and the crypto assets purchased were diverted to foreign wallets.
ED also discovered that Zanmai Labs – the owner of WazirX – has created a web of agreements with various entities, including Crowdfire (founded by Nischal Shetty), Cayman Island registered Binance, and a Singapore-based entity called Zettai.
Due to an uncooperative attitude of the director of WazirX, a search was conducted under the Money Laundering Prevention Act (PMLA) on Aug. 3, which found that Sameer Mhatre, a director of WazirX, had full access had remote access to WazirX’s database, but despite this, he did not provide the details of the transactions related to the crypto assets purchased with the proceeds of crime from Instant Loan APP fraud.
“The lax KYC standards, loose regulatory scrutiny of transactions between WazirX and Binance, non-registration of transactions on blockchains to save costs, and non-registration of the KYC of the opposing wallets have left WazirX unable to account for the missing crypto assets. It has made no effort to trace these crypto assets,” said ED.
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The Ministry of Finance informed the Rajya Sabha on August 2 that the ED was investigating two cases against WazirX under the Foreign Exchange Management Act, 1999 (FEMA). The ministry had further said that Zanmai Labs was using Binance’s walled infrastructure.
“By encouraging ambiguity and adopting lax AML standards, it has actively helped about 16 accused fintech companies to launder the proceeds of crime using the crypto route,” it said.
WazirX did not respond to ET’s request for comment.