Thanks Damut. I am not worried about the scams related to exchanges. These are widely well known exchanges.

What concerns me is the possible Money Laundering red flags that the government can bring in.

Think about it: This is a good way to move money (loads of it) from one country to the other (US to India). And make money doing that (quick a good amount).

I am not the only person in the world to have seen it. Why is no one doing it? Or are people doing it?

I doubt if people are doing it widely. Because in that case..the arbitrage will shrink, and it no longer remains the opportunity. Thats how arbitrage works!