Illicit Crypto-to-Cash Schemes Are Enabling New Methods of Money Laundering in Canada
In , secret stores and courier services are becoming essential players in the shadow banking system. Some of these companies operate openly in locations like Toronto and Montreal.
They act as middlemen, accepting large sums of cryptocurrency and distributing genuine cash with minimal to no oversight. People routinely make deals without revealing their identities through encrypted messaging apps like Telegram, which don’t always verify their users’ identities.
Investigators have found instances where these businesses traded millions of dollars’ worth of stablecoins, such as , without reporting to the government or verifying the identities of the parties involved.
In some instances, users were only requested to send a picture of the serial number on a banknote to prove its authenticity, which suggests that the system didn’t follow the rules.
Money Laundering Mechanisms and Red Flags
Experts in blockchain analytics and Canadian authorities agree that the widespread use of is detrimental to the financial system. These schemes provide criminal groups with a means to rapidly convert stolen cryptocurrency, which may originate from scams, trafficking, or ransomware payments, into cash that can’t be traced.
The method often circumvents rules and deletes digital trails, making it very hard for law enforcement authorities to find or retrieve the money. One major fragileness is that crypto wallets are anonymous, and there is no practical way for customers to conduct their due diligence.
Money from these cash desks typically originates from platforms listed on a “sanctioned” or “high-risk” platform list.
Some of these platforms even have links to services that the government bans. As the volume of trades rises, major cryptocurrency platforms have also been identified as key senders to these unregulated channels. This raises worries about compliance and governance at the platform level.
Record Penalties and Strict Enforcement
FINTRAC, financial intelligence agency, has intensified its enforcement efforts. Recently, it imposed a record C$176.9 million fine on a British Columbia-based crypto money services business for multiple violations, including failing to report suspicious transactions and breaching laws related to child exploitation and fraud.
The record-breaking fine underscores regulators’ increasing concerns about the ease of laundering money through cryptocurrency platforms, particularly when large transactions go unreported or unconfirmed.
Even with these steps, regulators acknowledge that the crypto market remains complex and risky. Many illegal transactions go unnoticed because cashiers devise innovative ways to evade detection, and law enforcement struggles to keep up.
Calls for Changes to the Rules
Experts in anti-money laundering (AML) and policymakers are urging Canadian officials to strengthen the country’s anti-money laundering system.
They aim to achieve this by making it more challenging to convert digital assets and ensuring that strict requirements are strictly followed. There are significant flaws in the Canadian financial system that have come to light due to the rise of crypto-to-cash businesses.
If these holes aren’t fixed, they could hurt the system’s openness and honesty. Canada is at a turning point: it needs to update its laws to prevent the emergence of new money-laundering methods, or it may become a global hub for illicit digital finance. This is because of growing international criticism and a recent evaluation by the Financial Action Task Force.
