India's FIU Investigates Cryptocurrency Exchanges for Terror Funding

India’s Financial Intelligence Unit (FIU) has initiated a comprehensive investigation into the use of cryptocurrencies for terror financing, with a particular focus on cross-border transactions originating from Pakistan. This probe comes amid growing concerns that digital assets are being exploited to fund illegal activities, including terrorism. The FIU has directed cryptocurrency exchanges to closely monitor transactions, especially those involving regions with a history of terror-related incidents.

The investigation has intensified following the Pahalgam terror attack, with the FIU instructing exchanges to pay special attention to transactions from Jammu and Kashmir. The FIU is tracking suspicious crypto wallets linked to Pakistan-based entities, which are suspected of being used to funnel funds for terror activities. This scrutiny has led to increased pressure on major cryptocurrency exchanges, including Binance and WazirX, which have been accused of facilitating these transactions.

Binance, one of the world's largest cryptocurrency exchanges, has been under the FIU's radar for its alleged role in enabling cross-border crypto transfers from Pakistan. The exchange has been cooperating with the FIU, providing necessary information to aid the investigation. However, WazirX, another prominent exchange, has also come under scrutiny. The FIU is investigating WazirX's possible links to cross-border crypto transactions that may be tied to terror funding. Despite WazirX's claims of full cooperation with law enforcement and a zero-tolerance policy towards unlawful activities, official sources have confirmed that the exchange is part of the ongoing investigation.

The FIU's probe into WazirX is not new. The exchange was previously named in a case filed by the National Investigation Agency (NIA) in January 2023. In that case, a student named Mohammad Mohsin Ahmad was accused of using a WazirX account to raise funds for the Islamic State. The NIA chargesheet revealed that Ahmad used his WazirX account to collect money from over 20 entities, transfer it from his Canara Bank account, and convert it into crypto. Payments were made using TRX to a Syria-based online entity called Ummimmarah, which was connected to IS activities. Ahmad's use of his PAN and Aadhaar credentials to open his WazirX account helped investigators track him down.

The Financial Action Task Force (FATF) has also raised serious concerns about the rising use of crypto platforms and online payments for terror funding. In its report, the FATF pointed to past cases, such as the 2019 Pulwama attack and the 2022 Gorakhnath Temple attack, as examples linked to this growing pattern. The FATF also mentioned that items like aluminum powder, used in making explosives, were bought through e-commerce platforms.

In August 2024, Binance officially registered with the FIU-IND, following India’s anti-money laundering rules. Prior to this, Binance was blocked from operating in India for seven months. WazirX is now under fresh attention as authorities continue to investigate its role in cross-border money transfers. Just this week, the Ahmedabad Police cracked a crypto scam where over ₹1 crore was sent through wallets linked to Nepal. Binance helped the police trace the transactions, and key suspects were caught. Even though this case wasn’t directly about terror funding, it has added to the government’s worries about crypto being misused for financial crimes.

The FIU is working on bringing in stricter reporting rules for crypto exchanges under the Prevention of Money Laundering Act. Exchanges may soon have to share more detailed and regular information about accounts and transactions flagged as suspicious. Meanwhile, WazirX has continued to deny any involvement in such activities; however, its name continues to be associated with official investigations. From the NIA chargesheet back in early 2023 to the new FIU probe in 2025, questions around WazirX just aren’t settling down.