Security establishment on high alert
SRINAGAR/NEW DELHI, Jan 18:
Security agencies have flagged a sophisticated “crypto hawala” network bypassing the country’s financial safeguards to funnel untraceable foreign funds into Jammu and Kashmir, sparking grave concerns that the money is being used to support terror activities, officials said on Sunday.
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This has put the security establishment on high alert, with officials warning that these shadow funds are intended to give a fresh lease of life to separatist elements and reignite the anti-national rhetoric within the Union Territory that had otherwise been virtually neutralised by a crackdown by police and central agencies, they said.
Mirroring the traditional hawala system, where money is sent through non-banking channels, this digital version uses the anonymity of unregulated cryptocurrency to erase the financial trail and inject cash into the domestic economy.
While India requires all Virtual Digital Asset Service Providers (VDA SPs) to register with the Financial Intelligence Unit (FIU), this shadow network operates entirely off the grid.
For the 2024-25 fiscal year, only 49 exchanges have registered as legal reporting entities, prompting the Government to come out with fresh guidelines that include a mandatory liveness detection and geographical tracking, besides asking users to take a “live selfie” using software that verifies their presence, typically through eye-blinking or head movement.
The “penny-drop” method, which involves processing a nominal Re 1 transaction to confirm that the bank account is active and belongs to the registrant, is required. In addition to a Permanent Account Number (PAN), users must provide a secondary ID, such as a Passport, Aadhaar or Voter ID, verified via OTP.
A detailed study done by the Jammu and Kashmir Police, along with central security agencies, identified people in countries like China, Malaysia, Myanmar and Cambodia directing people in the Union Territory to create private crypto wallets, which are often set up using a Virtual Private Network (VPN) to avoid detection and require no Know Your Customer (KYC) or identity verification.
The Jammu and Kashmir Police has already suspended the use of VPNs in the valley as registering in crypto wallets was increasingly seen in the region of late. The VPN is a handy tool for terrorists as well as separatists to avoid detection. (PTI)
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