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FINTRAC Guidance on Bitcoin ATMs and Money Laundering

Bitcoin ATM Guidance | May 16, 2024

FINTRAC Virtual ATM and Money Laundering - FINTRAC Guidance on Bitcoin ATMs and Money Laundering


The Role of Crypto ATMs in Laundering Proceeds of Crime

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has issued a Sectoral and Geographic Advisory "The Role of Virtual Currency Automatic Teller Machines in Laundering the Proceeds of Crime" to highlight the risks and provide guidance to businesses, financial institutions, and the public.  Cryptocurrency has revolutionized the financial landscape, offering unprecedented accessibility and anonymity. However, these advantages also attract illicit activities. One growing concern is the use of virtual currency automated teller machines (ATMs) in laundering proceeds of crime.

Understanding Crypto ATMs

Virtual currency ATMs, also known as Bitcoin ATMs, are internet-linked terminals allowing users to exchange fiat currency, such as Canadian dollars, for cryptocurrencies. Unlike traditional ATMs, these machines do not require a bank account, directly connecting users to the virtual currency exchange. While most transactions are legitimate, the ease of converting cash to crypto makes these ATMs an attractive tool for money laundering.

Geographic Hotspots

FINTRAC's advisory identifies significant risks associated with virtual currency ATMs. Based on suspicious transaction reports, key hotspots include the Greater Toronto Area, Greater Montréal Area, and Metro Vancouver, with notable volumes of suspicious activities also in Edmonton, Calgary, Winnipeg, Nelson, Abbotsford, Victoria, Ottawa, and Hamilton.

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These machines are pivotal in the "placement stage" of money laundering, where illicit cash is converted into virtual currency, making the source of funds difficult to trace. Criminals use various techniques to obscure the identity of those controlling the funds, including falsified identities and money mules.

Emerging Trends and Techniques

The advisory highlights several trends and techniques used by criminals:

  • Structured deposits is a red flag.  Depositing funds in amounts just below reporting thresholds, often using multiple virtual currency ATMs and different phone numbers to avoid detection.
  • Utilizing channels that are more complicated to track such as private wallet addresses, darknet markets, online gambling platforms, high-risk exchanges, peer-to-peer exchanges, and mixers to launder funds.
  • Fraudsters coaching and manipulating victims over the phone to complete transactions, often seen in video monitoring footage from ATMs.

Compliance and Due Diligence

FINTRAC emphasizes the importance of compliance. Virtual currency ATM operators must implement robust policies, procedures, and internal controls, including client identification and ongoing monitoring of high-risk transactions.

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Failure to comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) can result in severe penalties, including fines up to CAN $2,000,000 and imprisonment.

Consumer Awareness and Protection

Consumers are urged to be cautious of scams involving virtual currency investments. Fraudulent schemes often solicit investments through social media or impersonate government agencies to extort payments. Individuals should thoroughly research any virtual currency exchange or investment opportunity and be wary of offers that seem too good to be true.

How to Report Suspicious Activities

If you encounter suspicious transactions or suspect money laundering or terrorist financing activities, report them to your financial institution and FINTRAC. In urgent cases, contact local law enforcement. Victims of fraud are encouraged to report to the Canadian Anti-Fraud Centre.

Download the 9 page PDF Guidance on Crypto ATMs and Money Laundering --> here

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