In an attempt to control illegal financial practices and cross-border terror funding, India requires crypto platforms to intensify the screening of transactions that emanate from Jammu & Kashmir and other sensitive border locations.
The Financial Intelligence Unit (FIU-IND) sent out a directive last week to exchanges requiring them to watch and report on activity involving private wallets, non-custodial crypto tools that facilitate peer-to-peer transactions without supervision. Authorities caution that these can be deployed to disguise identities and paths to get around official money systems.
With the volatile and porous borders of Jammu and Kashmir, Indian intelligence agencies have been increasingly seeing crypto as a possible conduit for criminal cross-border financing.
Such a level of scrutiny is not new, said Mohith Agadi, the founder of the Fact Protocol. However, in periods where the tension is high, enforcement is stricter.
In contrast to the standard Suspicious Transaction Reports (STRs) that are already required from crypto businesses, the new advisory recommends proactive monitoring, even without traditional red flags, particularly on the borders.
Privacy-focused cryptocurrencies such as Monero and Zcash add to the challenges, says a source from the industry quoted by The Economic Times. These coins make it much more difficult for law enforcement to trace the transactions.
Agadi further cited a big 2020 operation by the U.S. forces that helped to bring terror-linked crypto-networks down, implying that, as digital assets have similarly been used by extremist groups, they can be utilized to uncover them. With the appropriate tools, Web3 can help battle terrorism, not spur it, he said.
This step is in line with a world preference in security measures limiting crypto utilization regarding terror financing because regulators are trying to strike a balance between privacy and security at a national level.
Also read: U.S. man gets 30 years jail for sending crypto funds to ISIS
