Indian Financial Intelligence Unit issues Show Cause Notices to nine offshore VDA Service Providers

Virtual Digital Assets Service Providers (VDA SPs) were brought into the Anti Money Laundering/Counter Financing of Terrorism (AML-CFT) framework under the requirements of the Prevention of Money Laundering Act (PML) Act, 2002 in March 2023.

As part of its compliance action against offshore organisations, the Financial Intelligence Unit India (FIU IND) has issued compliance Show Cause Notices to the nine offshore Virtual Digital Assets Service Providers (VDA SPs) listed below under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA).

The Director of FIU IND has written to the Secretary of the Ministry of Electronics and Information Technology requesting that the URLs of stated organisations that are functioning illegally and in violation of the requirements of the PML Act in India be blocked.

Virtual Digital Asset Service Providers (VDA SPs) operating in India (both offshore and onshore) and engaged in activities like exchange between virtual digital assets and fiat currencies, transfer of virtual digital assets, safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets etc. are required to be registered with FIU IND as Reporting Entity and comply with the set of obligations as mandated under Prevention of Money Laundering Act (PMLA) 2002.

The requirement is based on activities and is not dependent on physical presence in India. The rule imposes reporting, record-keeping, and other duties on VDA SPs under the PML Act, including registration with the FIU IND.

FIU IND has registered 31 VDA SPs so yet. Several offshore firms, despite serving a significant portion of Indian users, were not registered and hence did not fall under the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.