Bringing Crypto Transaction Under the AML Lens in India


Governments worldwide are strengthening bitcoin anti-money laundering (AML) legislation while the private sector continues to innovate and personalise financial services. On the other hand, the technology that powers bitcoin can potentially extend payments by leveraging technological improvements for public policy goals. 

The implementation of government-controlled digital currencies is still under debate, clouded by the fear that its potential abuse by unscrupulous individuals may pose economic difficulties. Consumers and investors may gain from cryptocurrency, but criminals can exploit it and pose financial concerns.

Implementation of anti-money laundering measures in India

The Indian government has notified all interested parties about the need to comply with the country's Anti-Money Laundering (AML) statute while conducting cryptocurrency transactions. A notice from the Ministry of Finance bringing certain cryptocurrency transactions within the Prevention of Money-Laundering Act (PLMA) 2002 was issued in the Indian Gazette on March 7, 2023. This includes trading, moving, storing, and managing virtual assets. 

The PMLA would apply to all domestic cryptocurrency businesses. This is a significant step in regulating the cryptocurrency market in India since it requires all crypto companies to include sufficient KYC, transaction monitoring, and other systems in their operations.

Anti-money laundering (AML) regulations in India

Here are some key points:

  • All reporting entities are subject to AML requirements under the PMLA and the PML rules, which include client identification, Customer Due Diligence (CDD), customer acceptance, and record keeping.
  • Securities and Exchange Board of India (SEBI) has developed specific know-your-customer (KYC) criteria and guidelines for financial intermediaries and investors in the securities market.
  • The Reserve Bank of India, SEBI, and the Insurance Regulatory and Development Authority of India take the mantle in dealing with money laundering issues and set anti-money laundering standards by the PMLA rules.
  • The AML/CFT system in India is still in its infancy. The PMLA was created in 2005 and revised in 2009.
  • All firms are subject to the SEBI AML Guidelines, and the RBI managing director must adopt AML and KYC procedures for client acceptance and identification.
  • India's AML statute has been updated as reporting entities to cover banking intermediaries, financial firms, and accounting professionals such as Chartered Accountants and Company Secretaries.

Why do crypto transactions require AML compliance?

Crypto transactions require AML compliance due to their anonymous and global nature. Financial institutions must monitor customer transactions, report suspicious activity, and verify customers' identities. Effective AML regulations make money laundering less profitable and riskier. The crypto industry needs to be AML and KYC-compliant to improve trust.

What are the penalties for non-compliance with AML regulations in India?

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It is important to note that the Indian government has lately implemented anti-money laundering restrictions on cryptocurrency platforms and transactions involving virtual digital assets to discourage criminal conduct, encourage income disclosure and financial transparency, and prevent terrorist financing. In India, the repercussions for violating crypto rules may range from a maximum fine of Rs 20 crore to 1.5 years in jail. To avoid penalties, crypto companies in India must comply with national AML regulations and perform necessary KYC and transaction monitoring as part of their process.

Challenges and concerns for crypto transactions under the AML lens

AML challenges and concerns for crypto transactions are as follows:

  • The use of cryptocurrencies may expose users to a variety of hazards, including fraud, economic penalties, and money laundering.
  • Cryptocurrency transactions may provide a greater risk for money laundering because of their inherent anonymity, cross-border nature, and absence of centralised services.
  • The crypto industry's AML requirements are constantly evolving. There are nations with little to no AML legislation that criminals exploit to quickly transfer virtual assets across borders and launder money via Virtual Asset Service Providers.
  • Every organisation participating in bitcoin transactions is subject to AML requirements, depending on the geographical jurisdiction and the nature of the transactions.
  • Compliance with AML laws may generate end-user misunderstanding and complicate types of crypto transactions.
  • Some US states have also passed AML legislation that applies to bitcoin firms operating inside their borders, confusing the legal environment even more.
  • Cryptocurrency companies must know the cryptocurrency regulatory framework in each jurisdiction they operate.

The future outlook for AML compliance in crypto transactions in India

India's PMLA was recently revised to include digital assets, making cryptocurrency exchanges, non-fungible token (NFT) marketplaces, and custodial service wallet providers legally liable for monitoring suspicious financial activities. Cryptocurrency exchanges must conduct transaction due diligence and report suspicious or high-value transactions to authorities.

The decision to include crypto transactions in the AML framework is a massive step towards regulating the Indian crypto sector. It will aid in preventing money laundering and other financial crimes associated with bitcoin transactions. To comply with the new rules, bitcoin firms must spend on technology and resources. Overall, this is a fantastic start toward building a safe and secure environment for crypto transactions in India.


The Imarticus Learning Certified Investment Banking Operations Professional programme is a 150-180 hour curriculum designed to prepare students for careers in investment banking operations. Financial management, middle and back-office operations, KYC, anti-money laundering, investment services, and internet banking activities are all included in the curriculum. 

This course is perfect for finance graduates with 0-3 years of work experience.

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