A significant fine of nearly $177 million has been imposed on a cryptocurrency exchange by Canada’s financial intelligence agency, marking the highest penalty ever given for various violations, including failure to identify over 1,000 transactions associated with illicit activities. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) disclosed the penalty against Xeltox Enterprises Ltd., operating under the name Cryptomus and previously as Certa Payments Ltd., based in British Columbia.
This fine of $176,960,190 surpasses the previous record of around $20 million set by FINTRAC, which was levied on Peken Global Ltd., the operator of KuCoin, another cryptocurrency firm, in September. The enforcement action was prompted by violations related to child sexual abuse material trafficking, fraud, ransomware payments, and sanctions evasion, according to FINTRAC’s director and CEO Sarah Paquet.
An investigation revealed 1,068 instances where Cryptomus failed to report transactions involving darknet markets and virtual currency wallets associated with criminal activities. Darknet markets serve as platforms for illicit goods and services, while virtual currencies provide anonymity to holders, making them conducive to criminal operations.
In addition to not flagging suspicious transactions, Cryptomus also neglected to report 7,557 transactions originating from Iran between July 1 and December 31, 2024, violating anti-money laundering regulations and ministerial directives regarding transactions linked to Iran. These transactions were expected to be treated as high risk, with identity verification, due diligence, record-keeping, and reporting obligations unmet by Cryptomus.
Furthermore, FINTRAC identified 1,518 transactions in July 2024 that met the reporting threshold for large virtual currency transfers, yet were not reported by Cryptomus. The company was criticized for having deficient policies and procedures, leading to shortcomings in ongoing monitoring and client identification practices.
Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, various businesses are mandated to maintain records, verify clients, establish compliance frameworks, and report specific financial transactions to FINTRAC. Cryptomus had already faced repercussions earlier in the year when the B.C. Securities Commission prohibited the firm from engaging in securities trading and other market activities.
In the fiscal year 2024-25, FINTRAC issued a record 23 violation notices to non-compliant businesses, resulting in over $25 million in penalties. Since acquiring the authority in 2008, FINTRAC has imposed over 150 penalties for regulatory breaches.