Financial Intelligence Unit Registration for Virtual Asset Service Providers

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Financial Intelligence Unit Registration for Virtual Asset Service Providers

Descriptive Text

In India, Virtual Digital Asset Service Providers (VDASPs) are required to register with the Financial Intelligence Unit-India (FIU-IND) to comply with anti-money laundering regulations under the Prevention of Money Laundering Act, 2002 (PMLA). This mandate applies to all VDASPs operating within the Indian market, regardless of whether they are based domestically or offshore.

Definition of VDASPs

As per the Ministry of Finance's notification dated March 7, 2023, entities involved in the following activities are considered VDASPs:

  • Exchange between virtual digital assets and fiat currencies.
  • Exchange between one or more forms of virtual digital assets.
  • Transfer of virtual digital assets.
  • Safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets.
  • Participation in and provision of financial services related to an issuer's offer and sale of a virtual digital asset.

These activities encompass a wide range of services, including crypto exchanges, wallet providers, custodians, payment processors, and cryptocurrency issuers.

Registration Process with FIU-IND

The registration process for VDASPs with FIU-IND typically involves the following steps:

  • Appointment of Key Personnel: Designate a Principal Officer (PO) responsible for reporting and anti-money laundering compliance, and a Designated Director (DD). The PO should preferably be an Indian resident for better communication.
  • Self-Enrolment: Register on the FinGate Portal, the official platform for FIU-IND interactions.
  • Meeting with FIU-IND: Participate in an in-person or virtual meeting with FIU-IND representatives.
  • Documentation Submission: Provide necessary documentation on the FinGate portal as requested by FIU-IND.

This process generally takes about 2-3 months to complete.

Compliance Obligations

Once registered, VDASPs must adhere to several compliance requirements, including:

  • Customer Due Diligence (CDD): Implement robust Know Your Customer (KYC) procedures to verify client identities.
  • Transaction Monitoring: Establish systems to monitor transactions for suspicious activities.
  • Record Keeping: Maintain records of all transactions for at least five years after the business relationship ends.
  • Reporting Obligations: Report suspicious transactions promptly to FIU-IND, typically within seven days of detection.

These measures are designed to detect and prevent money laundering and terrorist financing activities.

Consequences of Non-Compliance

Failure to register with FIU-IND or adhere to PMLA provisions can result in:

  • Issuance of warnings.
  • Directions to comply with specific instructions.
  • Submission of compliance reports.
  • Imposition of monetary penalties.
  • Blocking of websites and mobile applications by the Ministry of Electronics and Information Technology (MeitY).

These actions underscore the importance of compliance to maintain operational integrity within the Indian market.

Recent Developments

As of February 2025, India is reassessing its stance on cryptocurrencies due to evolving global perspectives. This review may influence existing regulations and compliance requirements for VDASPs operating in the country.

In summary, VDASPs aiming to operate in India must register with FIU-IND and comply with the PMLA and associated guidelines to ensure lawful operations and contribute to the integrity of the financial system.