On March 7, 2023, the Department of Treasury announced that all virtual digital assets would fall under the Anti-Money Laundering Act of 2002 (PMLA) that regulates the regulated cryptocurrency market. loose management.
Understanding the Prevention of Money Laundering Act, 2002 (PMLA)
It was in 2002 when the National Democratic Alliance government passed the anti-money laundering law. This Act took effect on July 1, 2005. The Prevention of Money Laundering Act is considered a national commitment to the Vienna Convention on addressing money laundering and combating the financing of terrorism (CFT). and drug trafficking. The law aims to limit the conversion of illegally obtained money into legal cash. Through this act, the Enforcement Directorate (ED) was given powers to control and combat money laundering, thereby also confiscating assets and punishing money launderers.
In July last year, while responding to a question on cases handled by the ED, Union Finance Minister Pankaj Chaudhary informed the Lok Sabha that “till March 31, 2022, the ED has recorded received around 5,422 cases, attaching proceeds to the tune of Rs.1,04,702 crore (approximately), filed Charges in 992 cases leading to confiscation of Rs.869.31 crore and conviction of 23 person charged under PMLA.”
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What changes will this move bring?
The Ministry of Finance announcement intends to bring cryptocurrency transactions under the scope of PMLA. This implies that Indian cryptocurrency exchanges will have to disclose any suspicious activities related to buying or selling cryptocurrencies to the Financial Intelligence Unit- India (FIU-IND). The Financial Intelligence Unit- India (FIU-IND), as a central agency, is entrusted with the responsibility of receiving, processing, analyzing and disseminating information relating to legitimate financial transactions. suspicious to law enforcement agencies. FIU-IND conducts analysis and if anything wrong is found it informs the ED.
As per Sections 5 and 8(4) of the Act, the ED has the discretionary power to take and seize the property in question without any permission of the court.
The need to tighten controls on digital trade
During this time, there was hardly any regulation of digital assets including cryptocurrencies and non-fungible tokens (NFTs). However, in recent years, regulators have taken an aggressive stance as the use of digital assets has become mainstream. As of January 3, 2023, the value of all existing cryptocurrencies is approximately $804 billion. This is double the GDP of Singapore in 2021. Talking about India, around 10 million Indians have trusted and invested in cryptocurrencies.
Now, according to a report, illegal cryptocurrency usage hit a record $20.1 billion last year. Transactions involving sanctioned entities increased 100,000-fold, accounting for about 44% of the previous year’s illegal actions.
Is it possible to track money laundering through cryptocurrency transactions?
Yes, money laundering through cryptocurrency transactions can be tracked, however, this will require new approaches and new tools. This is because such money transfers are very different from traditional banking channels. While FIUs may be familiar with Know Your Customer (KYC) and Customer Due Diligence (CDD) standards, the technological nature of VDA poses a major challenge in gathering the necessary data. In such a case, an expanded intelligence framework of the intelligence unit is most necessary.
As recommended by Egmont Group, a good analysis of cryptocurrency wallets, associated addresses, blockchain records, hardware identifiers such as IMEI, IMSI or SEID numbers and MAC addresses is a must.
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Source: pagasa.edu.vn