Undercover investigations reveal that crypto exchange companies in Canada are evading financial laws by offering anonymous cash conversions without ID checks. Services proposed delivering up to $1 million in cash in Montreal for cryptocurrency transfers. Experts warn these operations facilitate unlimited crime by bypassing anti-laundering regulations.
Canada has long struggled with money laundering in sectors like banking, casinos, and real estate. The rise of unregulated crypto-to-cash services has opened new avenues for illicit finance, experts say. Cryptocurrencies like bitcoin, ethereum, and tether are decentralized, complicating tracking, but investigators can monitor initial purchases or off-ramps to fiat currency.
However, anonymous crypto-to-cash exchanges strip away these controls. Users can send cryptocurrency to unregulated wallets and collect cash without identification, enabling drug cartels or terrorists to launder funds easily. "If you have this way to move money with absolutely zero checks on it, you’re facilitating an unlimited amount of crime," said Richard Sanders, an expert on such operations. He added, "I could not have in my worst dreams predicted the reality we’re in now."
Nick Smart, chief intelligence officer at Crystal, described the transaction volumes as "absolutely staggering." His team found that crypto-to-cash businesses in Hong Kong processed at least $2.5 billion US last year, calling them "a perfect place to operate as a criminal because no one's going to ask any questions."
In an undercover operation by Radio-Canada, CBC News, the Toronto Star, and La Presse—as part of the International Consortium of Investigative Journalists' The Coin Laundry project—a reporter in Toronto picked up $1,900 US in cash from a registered money transfer business. She used only a $5 bill's serial number as verification, after transferring 2,000 tether tokens to Ukraine-based 001k via Telegram. The business is registered with FINTRAC, Canada's financial-intelligence agency, but the transaction violated rules requiring personal information for remittances over $1,000.
"They shouldn't be doing that. That's actually illegal," said Joseph Iuso, executive director of the Canadian Money Services Business Association. The business claimed a rogue manager arranged it off-books with his own legally earned cash.
In Quebec, journalists negotiated with 001k and another service for $1 million and $890,000 Cdn deliveries in Montreal, without ID requests. A web directory lists over 20 unregistered services across Canada, from Halifax to Vancouver. Iuso noted FINTRAC lacks resources to oversee 2,600-plus registered businesses, let alone unregistered ones. Since August 2022, 001k has received over $14.8 billion US in cryptocurrency, per Chainalysis data.
FINTRAC stated it is prepared to impose penalties and refer non-compliance to law enforcement. Sanders called the situation "Welcome to the Wild West."