Exposed: How Canada’s Unregulated Crypto Exchanges Are Fueling Anonymous Money Laundering

Shadow markets thrive as regulators scramble to keep up.

The anonymity loophole

Unregistered platforms bypass KYC checks, creating a playground for illicit flows—no fingerprints, no footprints. Canadian authorities estimate $2B+ in crypto transactions slipped through last year alone.

Regulators playing whack-a-mole

FSA enforcement actions lag behind new platform proliferation. 'Compliance is someone else's problem,' shrugs one offshore exchange operator—until the subpoenas arrive.

The finance sector's worst-kept secret

Banks feign shock while quietly processing off-ramps—after taking their usual 2% vig, of course. Meanwhile, privacy coins and mixers turn money trails into vapor.

This isn't disruption—it's deregulation on steroids. And the house always wins... until the Feds change the rules mid-game.

• Unregistered crypto exchanges in Canada enable untraceable transactions, which fuel criminal activity.
• Weak enforcement allows criminals to exploit crypto-to-cash services for money laundering.
• Canada plans stricter stablecoin regulations to address crypto market loopholes and ensure oversight.

Unregistered crypto exchanges in Canada are using regulatory loopholes to allow their users to transfer large amounts of cash into crypto without any identity checks. This is an emerging trend that presents a considerably serious threat to the financial integrity of the country. Drug cartels and perhaps terrorist groups are also enlisting the services to transfer money anonymously within cities across Canada.

Radio-Canada, CBC News, Toronto Star, and La Presse ran an undercover operation to find out the ease with which anybody can use unregistered crypto-to-cash services. The services enable people to make huge transactions without compliance checks, which is against Canada’s laws on anti-money laundering. 

The investigation found that crypto-to-cash services are becoming a popular instrument for illicit tasks, and feeble enforcement provides fresh opportunities to criminal ventures.

Lack of Oversight in Canada’s Crypto Industry Fuels Money Laundering

Although blockchain technology could effectively track certain transactions, some are not identified because of the absence of regulation at strategic stages of the process. Criminal groups are exploiting these loopholes to launder money and fund illicit activities without any oversight. This brings out the issue of poor regulation in the fast-growing digital finance industry in Canada.

A case study during the probe was of a Toronto business with FINTRAC (the financial intelligence agency of Canada). One of the reporters went undercover and used Telegram to transfer Tether to an exchange based in Ukraine and received $1,900 in cash. This was against the laws of Canada, which state that money service businesses should document recipient details on transfers of over $1,000. 

Nevertheless, the business used a rogue manager to process the transaction, which he said had been earned legally, and the counter worker knew nothing about the illegal deal.

In Quebec, journalists were offered untraceable cash payments up to $1 million in relation to Tether transfers. Since 2022, the service 001k has been transferring over $14.8 billion in cryptocurrencies and operates without proper registration under FINTRAC guidelines. These unregistered sites continue to pose a great danger to the financial safety of Canada, as they are used for illicit transactions in an unregulated manner.

Crypto Exchanges in Canada Pose Security Risks Without Regulation

Richard Sanders, a leading expert in crypto-to-cash services, suggests that companies lacking compliance checks enable the indefinite perpetuation of crimes. I could never have envisioned the reality we are in today, Sanders said. The absence of regulation is facilitating an ease by which criminals exploit these services, such as money laundering and financing terrorist operations.

Joseph Iuso, the executive director of the Canadian Money Services Business association, acknowledged that FINTRAC cannot adequately service the 2,600 registered money services businesses, much less the unregistered ones. 

There are more than 20 unregistered crypto-to-cash services listed in a web directory in Canada, most of which the operators in Toronto acknowledge allow their customers to remain anonymous.

Nevertheless, the agency has few resources and little enforcement ability, which implies that unregistered crypto services are unlikely to disappear without consequence. The RCMP has raised awareness of this problem in recent times with the seizure of $56 million from the TradeOgre exchange, the largest crypto seizure ever recorded in Canada.

Canada is in the process of enacting stricter laws on stablecoins before the federal budget of 2025. The new rules will require stablecoin issuers to have full reserves, have transparent redemption rules, and adopt risk management practices. The Bank of Canada has contributed $10 million towards supervision, with the aim of sealing the loopholes in the crypto regulation in the nation.