A FinTRAC report suggests Bitcoin ATMs are being used by money launderers.Abhijit Alka Anil/The Globe and Mail
Bitcoin ATMs are becoming a key tool for money launderers because the cash that is deposited into them is essentially untraceable, Canada’s financial intelligence unit cautions in a new report.
In the advisory published Tuesday, the Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, analyzed suspicious transaction reports and found links between cryptocurrency ATMs and suspected cases of fraud, as well as sex trafficking and cybercrimes such as hacks.
FinTRAC also analyzed the blockchain, the public ledger of all cryptocurrency transactions, and traced a number of suspicious transactions to virtual currency exchanges in Iran, Russia, Belarus and other jurisdictions that have weak anti-money-laundering and terrorist financing controls, are subject to economic sanctions, or both.
Companies that deal in virtual currencies, including operators of bitcoin ATMs, are considered money services businesses under Canada’s anti-money-laundering laws. As MSBs, they are among the businesses required to report certain transactions, including suspicious ones and those involving large sums of cash or virtual currency, to FinTRAC.
Failing to register with FinTRAC or to meet reporting requirements can result in administrative monetary penalties or criminal penalties, including fines and jail time. Last week, FinTRAC imposed a $6-million penalty on the world’s largest cryptocurrency exchange, Binance Holdings Ltd. – the first such action issued by the anti-money-laundering watchdog against a virtual currency trading platform.
FinTRAC hack raises concerns transactions not being reported to watchdog
The penalty was levied at a time of global crackdown on the cryptocurrency sector. South of the border, Binance has agreed to pay US$4.3-billion as part of a plea deal after admitting to failures in its anti-money-laundering controls.
FinTRAC issued its advisory on cryptocurrency ATMs in an attempt to help operators of the automated teller machines better identify suspicious transactions. The watchdog said its analysis identified users who were depositing large volumes of small amounts – between $100 and $999 – and then sending those funds to marketplaces on the dark web to purchase drugs, child pornography, malicious cybertools, and compromised financial and identity documents.
Many of the suspicious transactions identified by FinTRAC took place between 9 p.m. and 3 a.m., FinTRAC said. The largest volumes of suspicious transaction reports linked to bitcoin ATMs were concentrated in three hot spots: the Greater Toronto Area, the Greater Montreal Area and Vancouver.
Other regions with notable volumes of suspicious transactions made through virtual currency ATMs were Edmonton; Calgary; Winnipeg; Nelson, B.C.; Abbotsford, B.C.; Victoria; Ottawa; and Hamilton, the watchdog said.
FinTRAC said its findings warrant enhanced due diligence by operators of virtual currency ATMs, such as using blockchain analysis tools to identify transactions risky transactions.
The watchdog also listed a number of other red flags to be on the lookout for, such as video footage where the depositor is either on the phone with someone, or is accompanied by another individual and appears to be receiving instructions on how to carry out the transaction.
“Criminals may use a variety of techniques at virtual currency automated teller machines to transfer value and obscure the identity of those controlling the funds,” the advisory says.