In a major crackdown on illicit cryptocurrency transactions, the Income Tax Department’s Investigation Wing has unearthed a ₹330 crore crypto hawala racket operating out of Kerala. According to officials, the network was allegedly run under the facade of a flower export firm, which used cryptocurrency channels to move money outside the formal banking system.
Search operations were conducted across multiple locations in Malappuram and Kozhikode districts, revealing digital wallets and documents linking the suspects to international transactions.
Flower Export as a Front for Digital Hawala
Preliminary findings suggest that two individuals from Malappuram managed the export firm, which claimed to ship flowers to Indonesia. However, investigators found that the firm was primarily used as a conduit for crypto-based hawala transactions.
Payments for the supposed exports were made not through banking channels, but via cryptocurrency wallets. To conceal the movement of funds, the accused allegedly created multiple digital wallets under the names of students and local residents.
One of the key operators is believed to be managing activities from Saudi Arabia, while his associate oversaw operations in Malappuram and Kozhikode.
₹330 Crore in Crypto Transactions Detected
Officials estimate that the suspects conducted transactions worth roughly ₹330 crore through various cryptocurrencies.
“The exact quantum of illicit funds will be determined after the forensic audit of the digital wallets,” said a senior Income Tax Department official.
Given the suspected violation of foreign exchange regulations, the case is likely to be referred to the Enforcement Directorate (ED) under the Foreign Exchange Management Act (FEMA) for further investigation.
Crypto and Hawala: The New Nexus of Shadow Finance
In recent years, Indian enforcement agencies have reported a surge in hawala transactions conducted through cryptocurrency channels.
Experts note that digital anonymity, decentralization, and the lack of regulatory oversight make cryptocurrencies a preferred medium for cross-border money laundering.
The central government has tightened scrutiny over the virtual asset ecosystem. Last month, the Financial Intelligence Unit (FIU-IND) mandated all crypto exchanges, custodians, and intermediaries to undergo cybersecurity audits, emphasizing compliance under the Prevention of Money Laundering Act (PMLA).
FIU-IND has also made Virtual Digital Asset (VDA) service providers’ registration contingent upon cybersecurity certification, in an effort to prevent misuse of crypto infrastructure for laundering or illegal transfers.
25% of Cybercrimes Linked to Crypto, Say Reports
Recent national data indicates that nearly one in four cybercrimes in India now involves the use of cryptocurrency.
Criminal groups often use privacy coins, darknet markets, and crypto-mixing services to conceal illicit proceeds, making digital tracing extremely difficult for authorities.
Analysis: Digital Anonymity — The New Shield for Financial Crime
Financial experts warn that blockchain transparency is increasingly being turned into a tool of concealment.
Unless authorities strengthen beneficial ownership monitoring and enforce stricter Know-Your-Customer (KYC) protocols on wallets and exchanges, crypto hawala networks will continue to exploit digital currencies as a safe haven for illicit money flows.
