Canada fines Cryptomus a record $126 million for severe anti-money laundering (AML) violations, setting a firm regulatory precedent.
Canada’s financial intelligence agency imposed a record fine on crypto platform Cryptomus. Fintrac fined Xeltox Enterprises Ltd. C$176.96 million. This action was aimed at the broad non-compliance with the anti-money laundering laws. The company’s failures threatened the integrity of the financial system in Canada.
Canada Penalizes Cryptomus Over Massive Reporting Lapses
Specifically, the fine amounted to around $126 million USD. Furthermore, the penalty is related to activities in July 2024. Fintrac explained the numerous, significant reporting failures immediately. The enforcement action is a novel precedent for the crypto sector.
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The regulator found 1,518 separate instances of failure. Indeed, Cryptomus did not report big virtual currency transactions. These inflows amounted to C$10,000 or more from one client. As a result, this was a direct breach of the requirements of Canada’s Proceeds of Crime Act.
In addition, Cryptomus had a total of 1,068 separate failures. Moreover, these were for suspicious transaction reports. The firm did not have reasonable grounds to suspect offenses. Therefore, transactions that had a potential connection with crime went completely unreported by the platform.
Furthermore, Fintrac cited a non-compliance with a Ministerial Directive. The exchange also did not apply written compliance policies. Thus, policies were not kept updated and approved by a senior officer. Subsequently, this indicated deep-rooted, systemic problems with oversight.
Poor risk assessment was also discovered by the regulator. Specifically, the firm had not done a good job at documenting money laundering risks. In addition, terrorist financing risk was not properly evaluated. Therefore, this crucial step did not take the prescribed factors into proper consideration.
Unreported Activity Linked to Ransomware, Sanctions Evasion
Fintrac exposed the seriousness of the unreported activities. The transactions were related to money laundering proceeds. Indeed, these proceeds had come from highly illicit operations. These included the trafficking of child sexual abuse material.
On top of that money was linked to major fraud schemes. In addition, the transactions went unreported and involved payments for ransomware. Crucially, some funds also related to sanctions evasion. As a result, these failures seriously affected Canadian financial security.
Therefore, Fintrac is strengthening the significance of compliance frameworks. The agency is there to protect Canadians from the risk of financial crime. In addition, the action enhances the integrity of Canada’s financial system. Thus, the regulator is insistent on strong protections right now.
Subsequently, weaknesses in the virtual currency sector are evident. The lack of transparency affects necessary accountability to a significant extent. As a result, the sector is very susceptible to exploitation. This occurs as a result of missing or weak compliance controls.
Indeed, this action is part of a regulatory hardening trend. Canada is introducing new legislation to crack down on fraud prevention. In addition, a national financial crimes agency is envisaged. The agency will come into existence by the end of 2026.
Ultimately, the penalty is a landmark enforcement action. It means that crypto platforms have to focus on AML obligations. Therefore, the record fine is a powerful warning for the whole world. The message is that there will be severe financial consequences for compliance failures.
