Tag: Money laundering

Former RBI DG says central bank’s concerns on crypto stem from money laundering, valuation concerns, BFSI News, ET BFSI

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Former RBI Deputy Governor N S Vishwanathan on Wednesday said money laundering and lack of clarity on valuations are the primary concerns of central banks in being circumspect about the introduction of cryptocurrencies. If the government goes ahead and allows cryptocurrencies, bankers need to be wary and not confuse persons’ wealth with the amount of crypto assets they hold even if they do not use it as collateral for lending, Vishwanathan said.

The comments come amid a heated debate over whether to allow private cryptocurrencies into the country, which has seen the RBI being vocal about its concerns, while the government seems to be more amenable.

RBI Governor Shaktikanta Das had on Tuesday reiterated his concerns over cryptocurrencies, saying there are ‘far deeper issues’ involved in virtual currencies that could pose a threat to the country’s economic and financial stability. The government is likely to introduce a bill on cryptocurrencies during the winter session of Parliament, beginning November 29.

Vishwanathan said world over, central banks are concerned with cryptocurrencies and wondered what makes governments more supportive of it.

“The central bank’s concerns come from two fundamental areas. One, of course, is that crypto-assets are seen as a possible source of money laundering, number two is that the valuations,” he said, speaking at the 8th SBI Banking and Economic Conclave.

He said we should not confuse cryptocurrencies with dematerialisation, where there is an underlying asset, which comes up in a digital form.

The career central banker added that we do not know what defines a value of a crypto asset, and the limited understanding is demand-supply forces govern the value.

The value of bitcoin, probably the most popular among the crypto assets, “gyrated” to USD 10,000 and swings between USD 7-17,000 per coin, he noted.

Vishwanathan said a person’s crypto holdings should not determine the wealth because the constant volatilities in the value can make a rich person seem poor or vice-versa.

Bankers should be extra careful and should not look at the crypto holdings while assessing a wealth of a potential borrower and should not lend against such assets, he added.

Earlier, Vishwanathan said, central banks prefer central bank digital currencies (CBDC) over the private and unregulated crypto assets and added that the introduction of the CBDC will help foreign trade.

The former DG said the activity of big tech companies like Google in aspects like deposit mobilisation for lenders is not so high that the RBI needs to be concerned about.

SBI Chairman Dinesh Kumar Khara said our experiences with the past will ensure an orderly exit from the present stimulus given by the RBI.

Replying to a question on whether banks are overcharging for forex commissions to small exporters, Khara said the market forces can ensure that no one is over-charged, while Swaminathan J, a managing director of SBI, said any enterprise works on cross-subsidisation, where it earns higher from a particular revenue stream and less from another.

Swaminathan added that various fee and commission streams have closed down with time, and banks will take an appropriate call on this particular one and case of regulatory action.



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Banks flag concerns over US rules on consumer data, seek govt guidance, BFSI News, ET BFSI

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India’s banks have approached the government with their concerns over the mandatory sharing of customer details with US authorities under that country’s expanded National Defense Authorization Act (NDAA), which took effect on January 1.

A government official confirmed that the Indian Banks’ Association (IBA) has sought government intervention and guidance on the issue. Banks have pointed out that the provision will raise costs and any compliance shortfall can have serious implications.

The NDAA incorporates parts of the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2019, significantly enhancing the reach of authorities over foreign banks if they have a correspondent account with an American financial institution.

It allows the Department of Justice and the Department of Treasury to subpoena records of such a foreign bank. Importantly, this provision can be invoked without regard to whether the correspondent account was used for potential violation of US law or not.

Application will be Selective, Feel Bankers
The correspondent bank accounts of US financial institutions first came under watch through the US Patriot Act of 2001 to prevent money laundering and terror financing. “The banks have raised some concerns which are being looked at. The issues will also be discussed with the Reserve Bank of India and accordingly any decision will be taken,” said the official cited above.

Although Indian banks are compliant with the Foreign Account Tax Compliance Act (Fatca), Indian regulators should guide banks on the provisions of the NDAA that apply to them, experts said.

  • Banks raise concerns about customer confidentiality, data privacy and national security
  • Reach out to the govt through IBA
  • Banks already compliant with Fatca regulation
  • Govt to engage with regulator RBI on issue
  • Regulations allow US govt to subpoena foreign-located bank data if foreign bank has a US correspondent account

“This amendment will result in additional overheads on foreign banks that have correspondent accounts in the US for responding to any subpoenas with the risk of noncompliance being both financial penalty as well termination of correspondent relationships that essentially may cause loss of business share,” said Jaikrishnan G, partner, financial services consulting, Grant Thornton Bharat.According to Jaikrishnan, Indian banks that have correspondent accounts with banks in the US will need to consolidate and limit such accounts within the US to balance business volumes with compliance costs and legal exposure. “Banks will need to strengthen transaction scrutiny on such correspondent accounts to safeguard themselves against potential involvement in such investigations,” he said.

Bankers are of the view that the application of this amended provision will be selective and only relevant in cases where there is court intervention. “But clarity is needed and that is why we have approached the government,” said a bank executive aware of the developments.



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Crypto bourses block accounts as red flags rise, BFSI News, ET BFSI

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Indian cryptocurrency exchanges have started reporting and blocking trading accounts, which undertake suspicious trades after government agencies raised red flags over cryptocurrencies being used for money laundering.

The self-regulation comes at a time when India is yet to come out with any regulations around cryptocurrencies or the way to tax them. Industry trackers say investigators including cybercrime officials, the Enforcement Directorate and the income tax department, had raised red flags in the past few months.

Also, top crypto exchanges are getting requests from foreign investigators regarding certain suspicious accounts.
For instance, WazirX, one of the largest cryptocurrency exchanges in the country, recently declared the numbers in what it calls a “transparency report”.

Between April and September this year, the exchange got 377 requests from legal enforcement agencies, out of which 38 requests were from foreign law enforcement agencies. The crypto exchange locked about 1,500 accounts.

In all, the exchange locked 14,469 accounts, although most of them were after customers asked them to stop services or there were some other payment issues.

“Initiatives such as the transparency report add credibility to the ecosystem and make the crypto world look more appealing to outsiders,” Nischal Shetty, CEO and founder, WazirX. “We aim to look at the bigger goals like positive regulations and consider ourselves paving the way to it through innovative approaches.” Many regulators in India had raised red flags around certain cryptocurrency transactions.

Exchanges have said they have developed a strong internal anti-money laundering policy as well.

“In India, we are bringing our four years of robust policy with our technologies to make sure we build products and services which help in crypto adoption but at the same time minimise the risk of money laundering,” said Kumar Gaurav, founder & CEO, Cashaa.

The exchanges waking up to money laundering and other regulators also come at a time when India is planning to come out with a cryptocurrency regulation.

There has always been regulatory scepticism around cryptocurrency and whether it can be used for illegal activities from buying drugs to money laundering.

The exchanges have always claimed that if the cryptocurrency is based on a blockchain technology, all the records are permanent and, in fact, it would be easier to discover the exact nature of the transactions.

“The report and the think tank is part of our efforts to bring more clarity and build transparency for our users and policy makers in India around everything crypto,” said Aritra Sarkhel, director of public policy at WazirX. Most of the large exchanges have seen between 100% and 400% jump in their volumes and value of trade that happen on their platforms amidst the global rally and some hope on the domestic regulatory front.



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Rana Kapoor’s wife, daughter get interim relief, BFSI News, ET BFSI

Banking & Finance

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A special Central Bureau of Investigation (CBI) court Saturday granted interim bail to the wife and daughter of promoter of Yes Bank Ltd (YBL), Rana Kapoor who is jailed in the alleged fraud caused to the private bank.

While the CBI is probing him on corruption charges, the Enforcement Directorate (ED) is investigating him in multiple cases of alleged money laundering.

In August, this year, CBI filed its supplementary chargesheet against Kapoor, his family members and four former junior employees of the bank in connection with the corruption case registered with the CBI pertaining to the loans given to DHFL.. The accused were summoned and the hearing in the said matter was scheduled for today.

Advocate Vijay Aggarwal and Advocate Rinku Garg, filed a bulky regular bail applications for Bindu Kapoor and Radha Kapoor, running into around 250 pages. The prosecution sought time to reply to the plea. The court has adjourned the matter to September 8.

Advocate Aggarwal argued before the court that his clients were charge-sheeted by the CBI without arrest and that in view of the latest judgment passed by the Supreme Court of India just two days back in Aman Preet Singh v/s CBI, his clients deserved to be granted bail.

He further argued that the court had already exercised the discretion of issuing summons to his clients, which clearly shows no need for the arrest of his clients. He contended that his clients were granted regular bail in December, 2020 by a special PMLA court in the said matter, “…which clearly shows that there were no chances of his clients absconding or tampering with evidence. Bindu Kapoor is a housewife and that Radha Kapoor Khanna had two young children so his clients shall be duly available to attend the trial”.

CBI’s counsel stated that the bail applications filed were bulky in nature and sought time to reply to it.

The court, after granting interim bail to Bindu Kapoor and Radha Kapoor Khanna, has kept the matter for reply by September 8.

According to the CBI’s first chargesheet filed last year, in June 2018, Kapoor, then the head of Yes Bank’s management credit committee, sanctioned a loan of Rs 750 crore on an application by the DHFL promoters in the name of Belief Realtors Pvt Ltd. for development of a Bandra Reclamation Project. This amount was advanced to RKW Developers, a company controlled by Dheeraj Wadhwan although the bank’s risk management team had pointed out multiple and serious issues in the proposal.

The agency’s probe revealed that the loan of Rs 750 crore was not utilised for the stated purpose.

Simultaneously, Kapil Wadhawan is said to have paid a kickback of Rs 600 crore to Kapoor and his family members in the garb of a builder loan from DHFL to DOIT Urban Ventures (India) Private Ltd. (DUVPL). Roshini Kapoor is one of the directors of DUVPL.

After deducting a processing fee, an amount of Rs 632 crore was transferred to RKW Developers. This amount was then routed to other entities controlled by the Wadhawans – KYTA Advisors and RIP Developers – to settle a loan obtained from DHFL for the same Bandra Reclamation Project in November 2015.



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ED issues show cause notice to WazirX, directors under FEMA

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The Enforcement Directorate has issued a show cause notice to cryptocurrency exchange Zanmai Labs Pvt Ltd, known as WazirX, and its Directors Nischal Shetty and Sameer Hanuman Mhatre under the Foreign Exchange Management Act, 1999 for transactions involving cryptocurrencies worth ₹2,790.74 crore.

In a statement, the ED said it has initiated FEMA investigation on the basis of the ongoing money laundering investigation into Chinese-owned illegal online betting applications.

Also read: Leading crypto exchanges scout entry into India despite potential ban

During the course of the investigation, it was seen that the accused Chinese nationals had laundered proceeds of crime amounting to about ₹57 crore by converting INR deposits into cryptocurrency Tether (USDT) and then transferring the same to Binance (exchange registered in Cayman Islands) Wallets based on instructions received from abroad.

“WazirX allows wide range of transactions with cryptocurrencies including their exchange into Indian rupees and vice-versa; exchange of cryptocurrencies; Person to Person (P2P) transactions; and even transfer and receipt of cryptocurrency held in its pool accounts to wallets of other exchanges which could be held by foreigners in foreign locations,” ED said.

WazirX does not collect the requisite documents in clear violation of the basic mandatory Anti-Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines, it further said.

In the period under investigation, users of WazirX, through its pool account, received incoming cryptocurrency worth ₹880 crore from Binance accounts and transferred out cryptocurrency worth ₹1,400 crore to Binance accounts.

None of these transactions are available on the blockchain for any audit or investigation, the ED said, adding that it was also found that customers of WazirX could transfer ‘valuable’ crypto-currencies to any person irrespective of its location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering or other illegitimate activities.

Nischal Shetty, CEO and Founder, WazirX, however, said the company is yet to receive any show cause notice from the Enforcement Directorate.

“WazirX is in compliance with all applicable laws. We go beyond our legal obligations by following Know Your Customer (KYC) and Anti-Money Laundering (AML) processes and have always provided information to law enforcement authorities whenever required. We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we will fully cooperate in the investigation,” he said in a statement.

Concerns over KYC and money laundering have been raised with regard to cryptocurrencies globally. The circular by the Reserve Bank of India on May 31 had also asked banks to continue to carry out customer due diligence processes in line with regulations governing standards for KYC, AML, CFT and obligations of regulated entities under Prevention of Money Laundering Act, 2002.

Most cryptocurrency exchanges in the country say that they follow due diligence for KYC and AML.

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ED issues show cause notice to WazirX, directors under FEMA

Banking & Finance

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In a move that further raises concerns over the functioning of crypto-currency exchanges, the Enforcement Directorate has issued a show-cause notice to one of the largest domestic crypto-exchange, WazirX, and its Directors Nischal Shetty and Sameer Hanuman Mhatre for alleged violation of the Foreign Exchange Management Act on transactions involving crypto-currencies worth ₹2,790 crore.

WazirX was bought out by Chinese crypto-currency firm Binance in 2019.

WazirX launches NFT marketplace for Indian artists

In a statement on Friday, the ED said it has initiated a probe on the basis of its ongoing money-laundering investigation into Chinese-owned illegal betting applications. In September, the agency had searched 15 locations in Delhi, Gurugram, Mumbai and Pune and busted a worth ₹1,268-crore online betting racket involving Chinese companies. In December, the ED said a large amount of money was inexplicably transferred using crypto-currency.

On Friday, the ED said the investigations had revealed some Chinese nationals had laundered proceeds of crime amounting to about ₹57 crore, by converting Indian rupee deposits into crypto-currency Tether and then transferring it to Binance (the exchange is registered in Cayman Islands) Wallets on instructions from abroad.

Range of transactions

“WazirX allows wide range of transactions with crypto-currencies, including exchange into Indian rupees and vice-versa; exchange of crypto-currencies; and even transfer/receipt of crypto-currency held in its pool accounts to wallets of other exchanges which could be held by foreigners in foreign locations,” the ED said.

Crypto exchanges bet big on India

WazirX does not collect documents, in clear violation of the mandatory Anti-Money Laundering (AML) and Combating of Financing of Terrorism (CFT) norms and FEMA guidelines, it said.

In the period under investigation, users of WazirX have, through its pool account, received crypto-currency worth ₹880 crore from Binance accounts and moved out crypto-currency worth ₹1,400 crore to Binance accounts.

No audit trail

The main concern for the investigative agency is that none of these transactions is available on blockchain for any audit/investigation. Also, It was found that WazirX customers could transfer ‘valuable’ crypto-currencies to any person irrespective of his/her location and nationality without any documentation, making it a safe haven for those looking to launder money or for other illegitimate activities.

Nischal Shetty, CEO and Founder, WazirX, however, said the company is yet to receive any show-cause notice from the ED.

“WazirX is in compliance with all applicable laws. We go beyond our legal obligations by following Know Your Customer (KYC) and AML processes and have always provided information to law enforcement authorities. We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we will fully cooperate in the investigation,” he said in a statement. The cryptocurrency exchange also tried to ease investor concerns. “Your funds are absolutely safe,” it said in a tweet. While last week, the RBI said it has major concerns around crypto-currencies, most crypto exchanges in the country say the concerns are unfounded as all transactions are based on proper AML and KYC processes.

 

 

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ICICI-Videocon PMLA case: HC grants bail to Deepak Kochhar

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The Bombay High Court on Thursday granted bail to Deepak Kochhar, husband of former ICICI Bank CEO Chanda Kochhar, in a money laundering case registered by the Enforcement Directorate (ED).

Kocchar had approached the high court after a special court in the city rejected his bail in December last year.

Also read: ICICI Bank launches instant EMI facility on net banking for high value transactions

Justice PD Naik of the high court granted bail to him on merits on Thursday.

Kocchar was arrested by the ED in September last year under the Prevention of Money Laundering Act (PMLA) in the alleged ICICI Bank-Videocon money laundering case.

The ED registered the money laundering case following an FIR registered by the Central Bureau of Investigation (CBI) against the Kochhar couple, Videocon Group promoter Venugopal Dhoot, and others for allegedly causing loss to ICICI Bank by sanctioning loans to the Videocon Group of companies in contravention to the policies of ICICI Bank.

Kochhar had argued that the ED had taken note of all the alleged proceeds of crime in the case, so there was no chance of him creating any third party rights, or interfering with the probe if out on bail.

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SEBI orders attachment of Rana Kapoor’s assets to recover ₹1-cr dues

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To recover its pending dues from YES Bank founder Rana Kapoor, market regulator SEBI has directed the attachment of his assets.

SEBI had imposed a fine of ₹1 crore on Kapoor in September 2020 and he has failed to pay it. The fine was levied on Kapoor for not making disclosures regarding a transaction of Morgan Credit, which was an unlisted promoter entity of YES Bank. Kapoor had created an opaque layer between him and stakeholders and violated the provision of the LODR (Listing Obligations and Dislcosure Requirements) Regulation, Securities and Exchange Board of India had said in the order.

Also read: SEBI seeks ‘discretion’ in prosecutions

SEBI had sent a demand notice to Kapoor in February this year but he did not clear the dues. The pending dues, totalling ₹1.04 crore, include an initial fine of ₹1 crore, interest of ₹4.56 lakh and recovery cost of ₹1,000, the attachment notice says. SEBI has asked banks, depositories and mutual funds not to allow any debit from the accounts of Kapoor. However, credits have been permitted. Also, the regulator has directed the banks to attach all accounts, including lockers, held by the defaulter.

The Enforcement Directorate (ED) had arrested Kapoor in a fresh money-laundering case linked to an alleged ₹4,300-crore fraud at the Punjab and Maharashtra Cooperative (PMC) Bank in Maharashtra. Kapoor has already been in judicial custody after he was arrested by the central probe agency in March last year in connection with alleged financial irregularities and purported kickbacks paid to him and his family members in lieu of certain loans provided by YES Bank to a number of high-profile borrowers.

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ED attaches over Rs 17-cr assets of Amnesty International India on money laundering charges, BFSI News, ET BFSI

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The Enforcement Directorate on Tuesday said it has attached over Rs 17 crore bank deposits in connection with its money laundering case against two entities of Amnesty International (India), the global human rights watchdog. The agency said in a statement that a provisional order has been issued under the Prevention of Money Laundering Act (PMLA) “attaching bank accounts of Amnesty International India Pvt Ltd (AIIPL) and Indians for Amnesty International Trust (IAIT)”.

It said “both the entities have acquired the proceeds of crime and layered the same in the form of various movable properties. The order involves attachment of movable properties worth of Rs 17.66 crore being proceeds of crime”.

This money laundering case of the ED is based on a Central Bureau of Investigation (CBI) FIR filed against AIIPL, IAIT, Amnesty International India Foundation Trust (AIIFT) and Amnesty International South Asia Foundation (AISAF) that was filed under various sections of the Foreign Contribution Regulation Act (FCRA) and the Indian Penal Code (120-B which denotes criminal conspiracy).

“Amnesty International India Foundation Trust (AIIFT) had been granted permission under the FCRA during 2011-12 for receiving foreign contribution from the Amnesty International UK,” it said.

However, the statement said the same was cancelled on the basis of the “adverse” inputs received.

“Since permission/registration has been denied to the said entity on the basis of adverse inputs received from security agencies during the year 2011-12, AIIPL and IAIT were formed in the year 2013-14 and 2012-13, respectively to escape the FCRA route and carried out NGO activities in the guise of service export and FDI,” the agency alleged.

A probe found, the ED said, that upon cancellation of the FCRA licence by the Union government, Amnesty International India Foundation Trust and Amnesty entities adopted “new method” to receive money from abroad.

The agency said Amnesty International, UK sent Rs 51.72 crore to AIIPL in the guise of export of services and the Foreign Direct Investment (FDI).

“For export proceeds/advances to Amnesty International UK there was no documentary proof, such as invoices and copies of agreement between AIIPL and Amnesty International UK, has been furnished by AIIPL to the authorised dealer (AD) banks.”

“It is prima facie found that Amnesty International India Pvt Ltd and others have obtained foreign remittances to the tune of Rs 51.72 crore in the guise export of services and the FDI from Amnesty International (UK) whose source is the donations from individual donors,” the ED alleged.

The agency has earlier attached some properties in this case and the total attachment value now stands at Rs 19.54 crore.



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