Rising Risk of Crypto Laundering in Canada
Illicit crypto-to-cash deals are opening new avenues for money laundering in Canada, according to experts. Crypto exchange companies in the country are evading financial regulations by buying large amounts of digital currencies without proper registration or identity checks. Some international platforms have even proposed delivering up to $1 million in cash for cryptocurrency, further exposing Canada to increasing crypto laundering risk.
Canada has long struggled with dirty money in its traditional economy—spanning sectors like banking, real estate, and casinos. However, the rise of cryptocurrency services, both storefront and online, has uncovered new vulnerabilities. The lack of strong regulation and enforcement is enabling these illicit activities to thrive.
Decentralized Nature of Cryptocurrencies and Regulatory Gaps
Cryptocurrencies, by their decentralized nature, make it difficult for authorities to trace who is behind illicit transactions involving digital currencies such as Bitcoin, Ethereum, and Tether. However, investigators can track initial purchases or exchanges of these digital coins into hard currency. Unfortunately, the unregulated process of moving money anonymously from digital wallets into cash makes it far harder to control.
Richard Sanders, an expert on crypto-to-cash operations, expressed his concerns: “If you have this way to move money with absolutely zero checks on it, you’re facilitating an unlimited amount of crime.”
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Testing Canada’s Crypto-to-Cash Services
In a recent investigation, Radio-Canada, CBC News, and the Toronto Star uncovered the ease of accessing such services in Canada. In Toronto, an undercover reporter was able to complete a transaction in a well-established money transfer business with just a Canadian $5 bill as verification. This is a clear violation of Canada’s anti-money laundering regulations, which mandate that money transfer businesses must record the recipient’s personal information for any transaction over $1,000.
Joseph Iuso, the executive director of the Canadian Money Services Business Association, condemned the transaction, stating that it was “illegal” for the business to process this transaction without following proper procedures.
Lack of Regulation and Oversight
Canada’s financial intelligence agency, FINTRAC, has been unable to properly oversee all 2,600 money-services businesses in the country, let alone the unregistered services. As a result, foreign crypto-to-cash services are illicitly offering their services to Canadians. Many of these businesses bypass regulations, creating a “Wild West” environment for illicit transactions, as described by Sanders.
A web directory lists more than 20 unregistered crypto-to-cash services in cities across Canada, from Halifax to Vancouver. Some of these services reportedly do not ask for any form of ID, further enabling the risk of money laundering and untraceable transactions.
Global Impact and the Need for Stronger Regulations
The illicit flow of money through crypto-to-cash services is not just a Canadian problem—it’s a global one. In Hong Kong, for instance, crypto-to-cash businesses processed over $2.5 billion USD last year alone. These platforms are often the ideal environment for criminal activity, as they rarely ask questions, making them an attractive option for illegal transactions.
In Canada, the risks posed by crypto-to-cash services are becoming more apparent, and experts are calling for stronger oversight and regulatory measures. As Sanders points out, the ability to move money without any checks makes these services a “perfect place to operate as a criminal.”
