Unregistered Crypto Firms in Canada Facilitate Money Laundering, Investigation Finds
Summary
- Undercover investigation shows unregistered crypto firms across Canada enabling anonymous cash-for-crypto deals, violating money laundering rules.
- Platforms transact millions with minimal compliance—one Toronto storefront exchanged cash using only a bill’s serial number as ID.
- Experts warn enforcement gaps; FINTRAC lacks resources, as firms offer up to $1 million in unverified cash, fueling criminal use of crypto.
Unregistered cryptocurrency exchange companies across Canada are facilitating large cash-for-crypto transactions without identity verification, while international platforms offer to deliver up to $1 million in untraceable cash, according to a joint investigation by Radio-Canada, CBC News, Toronto Star, and La Presse.
The investigation revealed how individuals can move money through these services with minimal compliance checks, exposing vulnerabilities that experts say enable criminal activity in the country’s digital finance sector.
Canada’s regulatory challenges with illicit funds in banking, casinos, and real estate have extended into crypto services, where enforcement gaps and limited oversight have created channels for money laundering, according to the investigation.
In one Toronto transaction, an undercover reporter collected $1,900 in cash using only a $5 bill serial number as verification, after transferring tether to a Ukraine-based exchange, 001k, via Telegram. The transaction occurred at a Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)-registered money transfer business.
The transaction violated Canadian anti-money laundering regulations requiring money service businesses to record recipient information for transfers exceeding $1,000. The Toronto storefront processed the exchange through a manager who later claimed he used his own cash “earned legally,” while the counter employee said they had no knowledge of the situation, according to the investigation.
Journalists in Quebec received offers from 001k and another service to deliver $1 million and $890,000, respectively, to Montreal locations in exchange for tether transfers, with no identity verification required, the investigation found.
Since August 2022, 001k has received over $14.8 billion in cryptocurrency transfers according to Chainalysis data. The platform operates without FINTRAC registration in Canada.
Richard Sanders, an expert on crypto-to-cash operations, said services with “absolutely zero checks” facilitate unlimited crime. “I could not have in my worst dreams predicted the reality we’re in now,” Sanders stated.
Nick Smart from Crystal Intelligence said Hong Kong’s crypto-to-cash businesses processed at least $2.5 billion last year, calling them “a perfect place to operate as a criminal because no one’s going to ask any questions.”
Joseph Iuso, executive director of the Canadian Money Services Business Association, said FINTRAC lacks resources to oversee all 2,600-plus registered money services businesses, and faces greater challenges policing unregistered operators.
One web directory lists more than 20 unregistered crypto-to-cash services operating from Halifax to Vancouver, with several Toronto-based operators telling undercover reporters they would not request identification, according to the investigation.
FINTRAC declined to answer questions about the investigation but stated it was prepared to take action through administrative penalties and law enforcement referrals.
The enforcement gap persists despite Canada’s largest-ever crypto seizure in September, when the Royal Canadian Mounted Police dismantled the TradeOgre exchange and seized $56 million CAD in assets following a year-long investigation launched after a Europol tip.
Canada is developing comprehensive stablecoin regulations ahead of its federal budget, following the United States’ passage of the GENIUS Act earlier this year. The 2025 federal budget framework will require stablecoin issuers to maintain full reserves, establish clear redemption policies, and implement risk management systems. The Bank of Canada will allocate $10 million over two years for oversight.
Only 3% of Canadians used Bitcoin for transactions in 2023, according to available data. However, institutional interest has grown, with a 2024 KPMG survey finding that 39% of Canadian institutional investors held crypto exposure, up from 31% in 2021. The country hosts over 3,000 Bitcoin ATMs, the world’s second-largest concentration of these machines.
