SIT on black money tells govt: Criminal gangs switch to cryptocurrency for money laundering, drug smuggling – Firstpost

New Delhi: Networks of criminal gangs are reportedly increasingly reliance on cryptocurrency for money laundering and drugs smuggling, the Special Investigation Team (SIT) on black money is learnt to have told the government. It has also recommended that no regulation is required for the virtual form of currencies as the prosecution in such cases remain pending for years.

The government had recently said that while there is no blanket ban on trading in cryptocurrency in the country, it was ready with a draft bill “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” for having a single law instead of a plethora of rules depending upon the crime. The SIT on black money is of the view that even strict regulations would remain on paper as all these transactions are carried out in utmost secrecy.

“Bitcoin and other forms of cryptocurrency are allegedly used for illegal purposes, such as transactions in narcotics, drugs, smuggling and investment of unaccounted money and can be easily used for illegal betting purposes. Mostly, the source for the purchase of Bitcoin would remain unknown, even if there are regulations to the effect that such currency could be purchased by paying the disclosed amount. Transactions in Bitcoin would be carried out only through Internet including those with cross-border ramification. It would be difficult to control such transactions which are carried with utmost secrecy,” SIT informed the government.

 SIT on black money tells govt: Criminal gangs switch to cryptocurrency for money laundering, drug smuggling

Representational image. Reuters

The SIT is believed to have told the government that in Gujarat, a massive Bitcoin scam was unearthed which primarily focused on laundering black money after demonetisation. SIT said in the case related to an Ahmedabad IT firm, many policemen were also involved in the crypto scam worth Rs 22,000 crores.

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Although there is no blanket ban on trading in cryptocurrency, the government has directed all the agencies concerned and law enforcement agencies like the Reserve Bank of India (RBI), Enforcement Directorate (ED) and Income Tax Department to take action under the existing laws. In the absence of a globally acceptable solution, the government is pursuing the matter with due caution.

In a recent plenary session on June 2019, the Financial Action Task Force (FATF), an inter-governmental body to combat money laundering and terror financing based in France,  had observed that threat from criminals and terrorists of misusing virtual assets is a serious issue and asked all countries to implement its recommendations.

The fraudsters are also targeting gullible people. In Taiwan, a scam to the tune of $51 million was busted while in Mumbai $71.6 million was reportedly siphoned off by a criminal gang after promising investors high returns.

The FATF has recommended that countries and financial institutions must identify and assess the money laundering or terrorist financing risks that may arise in relation to the existing or new virtual currencies. Through international cooperation, the law enforcement agencies should identify, assess and counter the money laundering by the virtual asset service providers, it said.

The National Association of Software and Services Companies (NASSCOM), a trade association of Indian Information Technology and Business Process Outsourcing industry, on the other hand, believes that India should not put a blanket ban on virtual currencies and a regulatory framework can be developed that will constantly monitor and prevent illegal activities.

“Regulation would allow the law enforcement agencies to be better equipped to understand these new technologies, enable them to gather intelligence on criminal developments and take enforcement actions. Conversely, a ban is more likely to deter only the legitimate operators as they have no intent to be non-compliant,” NASSCOM had stated in July this year.

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The SIT on black money, however, is not in favor of regulation since the prosecution for offenses takes a long time in the country.

“We are having a number of laws or regulations, which are required to be strictly implemented. But the experience reveals that enactment of a number of laws or regulations are openly breached and could not be enforced by the enforcing agencies. Even if it is tried to be enforced, the result is a lot of litigations remain pending for years. To avoid such a situation, there is no alternative but to declare it as ‘illegal transactions’. Those who deal with cryptocurrency should be punished without any further proof,” the SIT is believed to have told the government.



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