Canada’s Financial Watchdog Fines Crypto Firm Cryptomus $127 Million for AML Failures

Key Takeaways

• Record Fine: FINTRAC imposed its largest-ever penalty of $127 million (C$176,960,190) on Xeltox Enterprises, operating as Cryptomus, for extensive anti-money laundering violations.
• Serious Violations: The firm failed to file over 1,000 suspicious transaction reports and 1,500 large virtual currency transaction reports between July 1 and 31, 2024.
• Criminal Connections: FINTRAC said the unreported transactions were linked to child sexual abuse material, fraud, ransomware payments, and sanctions evasion.
• Compliance Failures: Cryptomus lacked written AML policies, ignored a ministerial directive, and failed to assess and document money-laundering risks.
• Regulatory Warning: The case marks an unprecedented escalation in Canada’s enforcement against virtual currency firms, underscoring FINTRAC’s intent to hold crypto platforms to the same compliance standards as banks and other financial institutions.

Deep Dive

Canada’s financial intelligence watchdog has handed down its largest-ever penalty, fining Xeltox Enterprises, the company behind the crypto platform Cryptomus, $127 million (C$176,960,190) for repeated violations of anti-money laundering and counter-terrorist financing laws.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) said the British Columbia–based firm was fined following a compliance examination that uncovered widespread failures to comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated regulations.

Between July 1 and July 31, 2024, FINTRAC found that Cryptomus failed to submit 1,068 suspicious transaction reports despite having reasonable grounds to suspect links to money laundering or terrorist financing. The company also neglected to report 1,518 large virtual currency transactions over $10,000, failed to comply with a ministerial directive, lacked written compliance policies, and did not assess or document money-laundering risks as required by law.

FINTRAC said the unreported transactions were connected to the laundering of proceeds tied to child sexual abuse material, fraud, ransomware payments, and sanctions evasion.

“As Canada’s virtual currency sector continues to expand rapidly, so too do the risks associated with money laundering, terrorist financing and sanctions evasion,” the agency said. “The vulnerabilities in the virtual currency sector significantly impair transparency and accountability and make the sector as a whole susceptible to exploitation by illicit actors if proper controls are not in place.”

In a statement, FINTRAC Director and CEO Sarah Paquet called the enforcement action “unprecedented,” noting the seriousness of the underlying activity.

“Given that numerous violations in this case were connected to trafficking in child sexual abuse material, fraud, ransomware payments and sanctions evasion, FINTRAC was compelled to take this unprecedented enforcement action,” Paquet said.

The penalty underscores FINTRAC’s growing focus on virtual currency businesses, which must follow the same anti-money laundering rules as banks and casinos. Under Canadian law, such entities are required to identify clients, maintain compliance programs, assess risk, and report suspicious and large financial transactions.

FINTRAC issued 23 notices of violation totaling more than C$25 million in the last year, but the fine against Xeltox Enterprises stands apart, by far the largest penalty ever imposed by the agency since it gained that authority in 2008. The case signals a turning point for Canada’s crypto industry, showing that regulators are ready to act decisively when compliance failures go unchecked.

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