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As decentralised finance has come of age, crypto and crypto exchanges have become an intrinsic part of investors’ lives over the past decade, and have grown at a tremendous rate. The total market cap of crypto is approximately $983 billion at the time of writing. With the increase in the popularity of crypto, the number of crypto exchanges has also skyrocketed.
However, as with anything to do with finance and investing, fraudsters and scammers are always on the lookout for loopholes in the system to illegally transfer funds to themselves. To keep a check on these illicit activities and more importantly, to proactively prevent them, crypto exchanges take preventive measures to protect their users against money laundering and other financial scams. For example, WazirX, India’s largest crypto exchange (by volume), has proactively crafted and implemented strict anti-money laundering, KYC, and other security checks.
Why is Crypto targeted?
The question of why crypto is targeted for such illegal and criminal activities often arises. It is primarily because crypto is one of the fastest-growing asset classes worldwide, with a market cap of $1 trillion till recently. In addition, various large and small organisations are now accepting crypto as a mode of payment; transaction costs with crypto are comparatively low vis-a-vis other asset classes. Moreover, crypto can be utilised as a hedge against inflation.
While crypto offers a great amount of anonymity to its users, one needs to remember that crypto transactions can be traced as they are recorded on the blockchain, which is a distributed ledger. These ledgers are open to the public and can be accessed by anyone and everyone. This definitely makes crypto a poor choice for money laundering activities.
Anti-Money Laundering measures taken by WazirX
Considering these threats to ethical business, most crypto exchanges around the world, including WazirX, have incorporated self-initiated checks and preventive measures to protect users. WazirX has a strict zero-tolerance policy towards any illegal activities conducted using its platform.
Since its inception WazirX has been vigilant and ensures that users stick to the law and no unlawful act is committed on the platform. Keeping in mind the Reserve Bank of India’s (RBI) guidelines, WazirX focuses on ensuring a proper KYC verification process for every user. Furthermore, as a self-initiated measure, WazirX regularly conducts all the necessary Anti-Money Laundering (AML) checks.
These AML checks are based on feedback received from different law enforcement authorities and past experience. WazirX has also improved Anti-Money Laundering and anti-fraud procedures after partnering with TRM Labs, a top blockchain analytics provider, through transaction monitoring, wallet screening, and risk management. This partnership has improved platform security and scaled compliance measures.
TRM Labs & WazirX reducing money laundering risks
WazirX has been a believer in ‘Continuous Transaction Monitoring.’ Whenever a user executes a transaction, the transaction hash is moved to TRM’s API, and multiple details of the transaction, like the addresses of the sender and receiver, are properly screened to prevent any risk. In case a risk is identified, an alert is immediately sent and logged in the alerts portal, where it is inspected, reviewed, and assigned to an investigator if required. Here, compliance investigators look into the alert more thoroughly using the Forensics tool to discover the source and destination of money in a transaction, the transaction history of the address, and any significant off-chain associations.
WazirX makes use of this transaction monitoring platform and the data produced by TRM Labs to help with regulatory reporting and support for law enforcement organisations. With this, WazirX has devised a process for putting in place a reliable monitoring system while gaining the following advantages:
● Payments fraud intelligence
● Audit trail maintenance
● Improving turnaround time for compliance personnel
● Improved data quality and architecture
● Knowledge sharing
WazirX and Law Enforcement Agencies (LEA)
Since the beginning, WazirX has pushed for organised regulation since regulation is unavoidable once there is widespread adoption and scale. WazirX keeps in touch with numerous domestic and foreign Law Enforcement Agencies (LEA) for this. WazirX teams offer complete cooperation and support as needed. For instance, during recent investigations in India, WazirX claims it has cooperated and adequately addressed all Enforcement Directorate’s (ED) inquiries. WazirX’s proactive cooperation allowed the ED to unlock its bank accounts.
WazirX received 952 transactional and user information requests from Indian law enforcement authorities between October 2021 and March 2022 and 71 requests from foreign law enforcement organisations. They were all satisfactorily addressed and were connected to criminal investigations.
WazirX against illegal activities
WazirX has a strict KYC and AML verification procedure that is implemented to ensure top-notch self-regulation. When a user violates these rules, submits a fraudulent KYC, or it is discovered that the WazirX platform is being used for unlawful activity, WazirX promptly blacklists the guilty user. In addition, large suspicious transactions, numerous accounts using the same IP address, etc., are also taken into account in such situations.
Conclusion
WazirX is contributing towards making crypto accessible to the masses in a way that’s easy to use, yet secure. While combating misinformation and debunking myths about crypto is one strategy to assist users in making well-informed crypto investment decisions, assistance from authorities, counterparts, and the community at large can have a more profound effect.