An undercover investigation has revealed alarming practices among both registered and unregistered cryptocurrency platforms in Canada, exploiting regulatory gaps to facilitate violations of Anti-Money Laundering (AML) rules.
Canada’s Crypto-Cash Service Compliance Concerns
On Monday, CBC News shared findings from a joint investigation with Radio-Canada, the Toronto Star, and La Presse, as part of a broader global report known as The Coin Laundry. This investigation unveiled that multiple exchanges in Canada and offshore are evading local financial laws by providing crypto-to-cash services without proper registration or identity verification.
The report highlights Canada’s long-standing issues with illicit funds within its traditional financial system, exacerbated by a lack of strong regulatory enforcement in the cryptocurrency sector. This has reportedly opened up “new frontiers for laundering and illicit finance.” Investigators discovered that both registered and unregistered firms have enabled transactions that breach AML regulations.
In a specific case, an undercover reporter in Toronto received $1,900 in cash from a FINTRAC-registered company after depositing 2,000 USDT into a Ukraine-based exchange, 001k. Intriguingly, the only verification performed involved checking the serial number of a $5 bill to match the transaction.
Meanwhile, two foreign platforms, including 001k, indicated to another undercover journalist that they could deliver up to $1 million in cash to a Montreal location in exchange for cryptocurrency, without ever requesting personal identification or verification.
Under Canadian AML law, remitting over $1,000 without collecting the recipient’s information and ID verification is illegal, and unregistered exchanges are prohibited from doing business with Canadians.
A comprehensive web directory lists over 20 services for converting crypto into cash across Canada, from Halifax to Vancouver, most of which are unregistered with FINTRAC. When approached anonymously by reporters, several Toronto-based services claimed they would not request any ID.
Richard Sanders, an investigator focused on crypto-to-cash networks, remarked, “If you have this way to move money with absolutely zero checks on it, you’re facilitating an unlimited amount of crime.” Nick Smart, Chief Intelligence Officer at Crystal Intelligence, echoed these concerns, noting the “absolutely staggering” amount being funneled through crypto-to-cash channels, citing $2.5 billion processed in Hong Kong last year alone.
FINTRAC Faces Regulatory Challenges
In response to the investigation, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) did not address specific questions regarding the undercover transactions or the existence of illicit crypto-to-cash services. However, it issued a statement reaffirming its commitment to taking strong action against non-compliance.
Earlier this year, FINTRAC levied a $126 million fine against Vancouver-based digital asset trading platform Cryptomus for multiple breaches of federal AML and Counter-Terrorist Financing laws, and is working towards a more comprehensive regulatory framework to align with global standards.
As noted in previous reports, Canada’s 2025 federal budget includes plans to establish regulations around stablecoins, aiming to bolster consumer confidence and modernize the payment ecosystem. Yet, as highlighted by Joseph Iuso, executive director of the Canadian Money Services Business Association, FINTRAC struggles to oversee the vast landscape of illicit transactions. Iuso noted that the agency lacks the resources necessary to effectively monitor over 2,600 registered money-service businesses, let alone unregistered platforms aiming to circumvent the law. “There’s just tons of them,” he stated, questioning how law enforcement can properly address the issue.
