Source: TOI
Subject: Government Scheme
Context: India has introduced stricter KYC and Anti-Money Laundering (AML) norms for cryptocurrency users by mandating live selfie verification, geo-tagging and bank account validation.
About India Tightens Crypto KYC to Curb Money Laundering and Terror Financing:
What it is?
- It is a mandatory digital identity verification framework for users of cryptocurrency exchanges, requiring them to prove their real identity, physical presence and financial linkage before trading virtual digital assets.
Organisation involved:
- The framework is issued and enforced by the Financial Intelligence Unit (FIU-India) under the Union Ministry of Finance, in line with the Prevention of Money Laundering Act (PMLA).
Aim:
- To prevent money laundering, terror financing and proliferation financing through crypto assets.
- To ensure that crypto transactions are traceable, accountable and linked to real individuals.
Key features:
- Live selfie with liveness detection – Confirms the user’s physical presence and identity by detecting real-time movements, preventing deepfakes and fake photo uploads.
- Geo-tagging with IP address – Records the exact location and device network of onboarding to trace suspicious or cross-border activities.
- PAN and secondary ID – Links crypto accounts to a verified legal identity, enabling tax tracking and law-enforcement verification.
- Penny-drop bank verification – A Re 1 transfer ensures the bank account is active and belongs to the user, blocking mule or fake accounts.
- OTP verification – Confirms control over registered mobile and email, adding an extra layer of authentication.
- Periodic KYC updates – Keeps customer information current and risk-sensitive, especially for high-risk users.
- Ban on mixers, tumblers and privacy tokens – Stops tools that hide transaction trails, enabling better tracking of illicit crypto flows.
Significance:
- Brings crypto exchanges under the formal financial surveillance system.
- Enhances investor protection and platform accountability.
- Aligns India with global FATF standards on crypto regulation.
