Binance Slapped with Rs18.82 Crore Penalty by India's FIU for Not Following PMLA Regulations

Moneylife Digital Team 20 June 2024

Binance, the world's largest crypto exchange, has been slapped with a penalty of Rs18.82 crore (about US$2.2mn-million) by the Financial Intelligence Unit-India (FIU-IND) for not registering and following regulations under the Prevention of Money Laundering Act (PMLA).

In an order, the FIU says, "After considering the written and oral submissions of Binance, the director of FIU-IND, based on the material available on record, found that the charges against Binance were substantiated."

This comes months after nine offshore exchanges in India were blocked for not registering and following anti-money laundering regulations under the PMLA.

Binance, by operating as a virtual digital asset service provider (VDA SP), is a reporting entity in India in terms of the PMLA.

On 28 December 2023, FIU issued a notice to Binance for providing services to Indian clients and the crypto exchange's operations within the country without adhering to the statutory obligations under PMLA.

"Furthermore, specific directions have also been issued to Binance to ensure diligent compliance with the obligations outlined in Chapter IV of the PMLA, in conjunction with the PMLA Maintenance of Record Rules (PMLA Rules) of 2005 for prevention of money laundering activities and combating the financing of terrorism (AMLCFT)," the FIU says.

Separately, according to a report from Moneycontrol, after paying the fine, Binance may restart its India operations. "Last month, Vivek Aggarwal, director of FIU-IND and additional secretary in the department of revenue, had said that Binance had completed initial registration in the country and was being evaluated for further compliance proceedings."

The report says Binance returning to India will be a bittersweet moment for local crypto exchanges, as they have been witnessing dwindling trading volumes over the past couple of years due to regulatory uncertainty, volatility of token prices and 30% tax imposed on income from crypto and 1% TDS (tax deducted at source) added on every crypto transaction of Rs10,000 in India.

"This had led to users or retail investors moving to locally unregistered global exchanges to evade taxes. Binance had benefited the most from this in terms of gaining users. But now, by locally registering, exchanges like Binance and KuCoin too will fall under the purview of Indian regulations and investors will have to pay high taxes," Moneycontrol says.

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