I-T dept. probes crypto-hawala links as Dubai becomes hotspot for illicit transfers

The Income Tax Department has ramped up its probe into a suspected crypto-hawala network, where cryptocurrencies are allegedly being used to facilitate illicit cross-border fund transfers. Dubai has surfaced as a central hub in this modern iteration of the traditional hawala system, which has long drawn regulatory attention.

According to sources within the I-T department, the modus operandi involves converting unaccounted cash into crypto assets within India and transferring them to wallets operated abroad, particularly in the UAE. These are then liquidated into foreign currencies and rerouted to beneficiaries, completely bypassing formal banking channels and regulatory oversight.

The racket reportedly makes use of shell companies, freelancers, and crypto wallets with lax Know-Your-Customer (KYC) norms to mask the identity of beneficiaries. According to investigators, certain Indian traders and small-time exporters may be using this model to evade capital controls and income tax, shifting their profits out of the country undetected.

A senior official involved in the probe stated, “The scale of these transfers is significant. Several wallets linked to Dubai-based operators have shown large volume movements in a short period.”

Multiple raids and notices have been issued in recent weeks, and authorities are now coordinating with global crypto exchanges and forensic blockchain experts to trace the on-chain flow of funds.

Dubai’s lenient crypto regulations and its rising status as a fintech hub are attracting individuals seeking anonymity and seamless currency conversion. Experts emphasize that curbing such laundering networks will require stronger cross-border enforcement and more rigorous KYC protocols.