Mumbai: The Directorate of Revenue Intelligence (DRI) in its recent report stated that the use of cryptocurrency in smuggling has surged in recent years, with stable coins like USDT increasingly replacing
traditional c. These digital assets enable faster and anonymous settlement, minimal oversight, and weak anti-money laundering (AML) compliance, the agency's report stated.
Why Crypto Preferred
According to the DRI, crypto wallets, often anonymous and accessible via VPNs, facilitate off-the-book illicit payments, including for under-invoiced and mis-declared imports allowing smugglers to evade customs duties and taxes, and other regulatory requirements. "The pseudonymous nature of cryptocurrencies such as Bitcoin allows fraudsters to conceal their identities, hindering detection and enforcement. In gold and narcotics smuggling, sale proceeds are either hawala-transferred or sent as cryptocurrency to masterminds abroad," the DRI officials said.
In July 2024, DRI had uncovered a transnational gold smuggling syndicate involving 108 kg of foreign-origin gold, routed through the Indo-China border using mules and porters. Once the gold reached Delhi, it was sold through jewellers and forex dealers, and the proceeds over Rs 108 crore were remitted to China via hawala and USDT crypto wallets, evading formal scrutiny. The Chinese mastermind used multiple crypto wallets, layering funds for anonymity, and communicated via encrypted Apps using VPNs. Forensic analysis of chats, transaction hashes, and wallet IDs corroborated the smuggling trail, marking a significant breakthrough in crypto-hawala detection by DRI.
Need for Regulation
"There is a growing convergence between traditional smuggling networks and emerging digital financial systems. Cryptocurrencies, with their decentralized and pseudonymous nature, have provided traffickers new means to transfer funds and conceal illicit profits, making detection and enforcement increasingly complex. However, the traceability of blockchain transactions also offers opportunities to enhance intelligence gathering and financial investigations through advanced analytics. The DRI’s application of blockchain analytics to trace cryptocurrency transactions marks a significant step in combating crypto-enabled crime. However, the evolving nature of digital assets demands stronger regulatory frameworks, enhanced Anti Money Laundering compliance, and advanced forensic tools, supported by global cooperation to curb cryptocurrency misuse," the report stated.
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