(MENAFN- Live Mint) New Delhi: Highlighting the increasing use of cryptocurrencies for smuggling and money laundering, the directorate of revenue intelligence (DRI) has said that stronger regulatory frameworks, advanced forensic tools and global cooperation are required to curb the misuse of these digital assets.

In its report Smuggling in India 2024-2025, released on Thursday, DRI has highlighted the growing convergence between traditional smuggling networks and emerging digital financial systems.

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“The use of cryptocurrency in smuggling has surged in recent years, with stablecoins like USDT increasingly replacing traditional hawala networks. These digital assets enable faster and anonymous settlement, minimal oversight, and weak anti-money laundering (AML) compliance,” it said. Hawala is an informal, trust-based money transfer system operating outside the banking system.

With their decentralized and pseudonymous nature, cryptocurrencies have provided traffickers with new means to transfer funds and conceal illicit profits, it said.

It, however, noted that 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 (AML) compliance, and advanced forensic tools, supported by global cooperation to curb cryptocurrency misuse,” it said.

Elucidating the use of cryptocurrencies in trafficking and transportation of narcotic drugs, the report said that the sale of drugs supplied by organized crime syndicates across borders has significantly changed with the rise of the internet and dark web marketplaces and the anonymity of online platforms, along with the use of cryptocurrencies, has allowed a secure and difficult-to-trace environment for such sales.

“In gold and narcotics smuggling, sale proceeds are either hawala-transferred or sent as cryptocurrency to masterminds abroad,” it said.

The report highlighted that in July 2024, DRI uncovered a transnational gold smuggling syndicate involving 108 kg of foreign-origin gold, routed through the India-China border using mules and porters.

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Once the gold reached Delhi, it was sold through jewellers and forex dealers, and the proceeds of over ₹108 crore were remitted to China through hawala and USDT (Tether) crypto wallets, evading formal scrutiny.

DRI in its report noted that globalization has exponentially increased the cross-border movement of goods, people, and capital, creating new vulnerabilities that demand a modern, intelligence-led approach to Customs enforcement.

“As global supply chains grow more complex and transnational crime exploits open borders and trade corridors, Indian Customs and DRI play a crucial role in safeguarding national security, including economic security, public health, and consumer safety by intercepting narcotics, arms, explosives, fake currency, hazardous materials, counterfeit goods, and illegal dual-use items,” it said.

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It also cautioned that India's economic expansion has seen a rise in increasingly complex commercial fraud, involving undervaluation, misdeclaration, misclassification, misuse of notifications and misuse of export incentives. In FY 2024–25, DRI booked 542 import fraud cases involving ₹2,606 crore in duty evasion and 63 export fraud cases involving ₹123 crore in fraudulent benefits, reflecting the growing scale and complexity of commercial customs fraud.

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