A record C$176,960,190 ($127m) fine has been levied on cryptocurrency exchange Xeltox Enterprises by Canada’s financial intelligence agency.
Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC) imposed the fine on October 15 in the form of an administrative monetary penalty, citing the trading platform’s noncompliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations.
Under the PCMLTFA, businesses ranging from financial institutions to real estate brokers and casinos must keep certain records, identify clients, maintain a compliance regime and report financial transactions meeting specific criteria to FINTRAC.
The penalty against British Columbia-incorporated Xeltox, commonly called Cryptomus, has been widely reported as the largest-ever penalty deployed by the agency. (For context, the largest fine imposed by that agency before Xeltox Enterprises was about $20m and given to Peken Global Ltd, the operator of another cryptocurrency firm, KuCoin, in September.)
What went wrong
FINTRAC cited multiple administrative violations on the part of Xeltox, including the following:
- Failure to file suspicious transaction reports (STRs) when there were suspicions of money-laundering or terrorist activity financing on more than 1,000 occasions over the course of July 2024.
- Failure to adhere to a Ministerial Directive.
- Failure to create and use up-to-date and approved written compliance policies and procedures.
- Failure to evaluate and document the risk of a money-laundering or terrorist activity financing offence in carrying out its business.
- Failure to file STRs when there were suspicions of transactions connected to trafficking of child sexual abuse material, fraud, ransomware payments, and sanctions evasion.
This record penalty from FINTRAC comes on the heels of Canada’s Minister Champagne announcing the creation of a Financial Crimes Agency to fight fraud and money laundering – complete with a C$200m investment ($143m) over the next four years.
In an official statement, the regulator’s director and CEO, Sarah Paquet, commented: “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.”