The Financial Action Task Force report also highlighted that the Union Home Ministry has launched a dedicated Sahyog portal to promote collaboration between social media intermediaries and relevant authorities. File | Photo credit: Reuters
A recent report by the Financial Action Task Force (FATF) has highlighted cases where India has taken action against offshore virtual asset providers (oVASPs) to counter the threats of money laundering and terrorist financing.
March 2026 report on “Understanding and mitigating the risks of offshore virtual asset service providers” discussed India’s regulatory environment, enforcement measures and detection tools. It also noted India’s ongoing efforts to establish a “Virtual Assets Lab” to enable round-the-clock detection of unregistered and high-risk platforms using analytics, open source intelligence and automated web monitoring.
The report states that India’s Financial Intelligence Unit (FIU) uses Suspicious Activity Reports (STRs) from domestic VASPs. A prominent example cited concerns “scam compounds”.
Registered Indian VASPs detected unusual patterns of deposits from offshore wallets and filed an STR. FIU’s analysis revealed that oVASPs were used to convert illicit proceeds into virtual assets (VAs) and then routed through registered Indian VASPs to domestic accounts as real money.
The NIA, CBI and ED are investigating offshore scams along the Myanmar-Thailand border, in Cambodia and Laos, where trafficked Indian nationals have been forced to commit cyber crimes.
“In another case, FIU found oVASP using the cover of an online gambling platform based in the Caribbean and using AML (anti-money laundering) blind spots to move value across borders. Access to the platform was blocked in India,” it said.
Listing the measures taken by India, the report said FIU has set up a dedicated task force with local VASP providers and other stakeholders such as banks, payment aggregators and gateways to formulate warning indicators and develop strategies to detect and address oVASP operations serving Indian users.
FIU has made it mandatory for Principal Officers (POs) of VASPs to be based in India. The producer organization is the main point of contact with the regulatory authorities. The official must be legally responsible for monitoring transactions, STRs and ensuring compliance with the Money Laundering Prevention Act.
The PO must have full access to customer, company systems and employee information, be senior enough to make independent decisions, work full-time only for a specific VASP in an AML/CFT/CPF role, and be a person distinct from the Designated Director. The FIU interviews POs and designated directors to determine compliance before allowing VASP registration.
The FATF report also highlighted that the Union Home Ministry has launched a dedicated Sahyog portal to promote collaboration between social media intermediaries and relevant authorities. It automates and streamlines the sending of takedown notices to social media platforms, web hosts, internal service providers when any content is deemed illegal or used to commit illegal acts.
“FIU India has used this platform to direct intermediaries to remove website content. So far, 85 URLs related to unregistered non-compliant oVASPs have been removed,” he said.
On the coordination front between various institutions, the Department of Revenue under the Ministry of Finance established a virtual assets sub-group in July 2023. This group meets regularly to identify emerging risks and formulate strategies. It encourages the sharing of trends, typologies and case studies between agencies, the report said.
OVASPs that do not have a local branch but serve domestic users must register in India. The report stated that such entities circumvent the country’s regulatory framework and that its effectiveness currently relies heavily on domestic financial/payment institutions and local payment service providers.
The report said that analysis indicated that after India introduced a virtual asset taxation regime in 2022, a significant portion of business traffic shifted from Indian to offshore unregistered VASPs. A large number of Indian clients have moved to such entities that are not compliant with Indian laws. They encourage the use of VPNs or shell companies to circumvent domestic regulations.
Published – 29 March 2026 23:32 IST
