An undercover investigation revealed that both registered and unregistered crypto platforms in Canada have exploited the country’s regulatory loopholes and facilitated violations of Anti-Money Laundering (AML) rules.
Reporters unveiled that multiple exchanges in Canada and offshore are reportedly evading local financial laws by offering crypto-to-cash services without proper registration or ID verification.
The investigation found that companies both registered and unregistered with Canada’s national watchdog, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), have facilitated transactions that violate AML rules.
In Toronto, a FINTRAC-registered company handed $1,900 in cash to an undercover reporter after receiving a 2,000 USDT deposit to a Ukraine-based crypto exchange, 001k. The employee only verified the serial number of a $5 bill to confirm it was the correct recipient for the transaction.
Under Canada’s AML law, it is illegal for a money transfer business to remit more than $1,000 to someone without registration of the recipient’s personal information and ID verification. Moreover, it is illegal for unregistered exchanges to do business with Canadians.
“One web directory lists more than 20 services for converting crypto into cash in cities across the country, from Halifax to Vancouver, none of them registered with FINTRAC. Contacted anonymously by reporters for the Toronto Star, a handful of the Toronto-based services said they wouldn’t ask for any ID,” CBC News added.
Richard Sanders, a crypto-to-cash network investigator, affirmed that “If you have this way to move money with absolutely zero checks on it, you’re facilitating an unlimited amount of crime.”
Nick Smart, Crystal Intelligence’s Chief Intelligence Officer, noted the “absolutely staggering” amount of money being pushed through crypto-to-cash services, highlighting the $2.5 billion processed in Hong Kong in 2024 alone.
The Canadian watchdog did not answer the reporters’ questions about the undercover transactions or whether it was aware of the crypto-to-cash illicit services available in the country.
However, it said in a statement that “FINTRAC is prepared to take strong action as necessary so that businesses take their responsibilities seriously,” adding that it “can include administrative monetary penalties and referrals of any non-compliance to law enforcement.”
Nonetheless, Joseph Iuso, executive director of the Canadian Money Services Business Association, told CBC News that FINTRAC faces challenges in overseeing these illicit transactions. According to Iuso, the financial watchdog doesn’t have enough resources to supervise properly the over 2,600 registered money-service businesses.
As a result, it also doesn’t have the capacity to track and act against unregistered platforms that illicitly offer services. “There’s just tons,” Iuso affirmed. “They’re all trying to circumvent the regulations. And, unfortunately, how do you police that?” he concluded.
