FINTRAC sanctions P2P crypto dealer

An Edmonton-based peer-to-peer crypto dealer is being sanctioned for alleged violations of anti-money laundering (AML) regulations.

On Thursday, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) announced that it imposed a monetary penalty of almost $700,000 against a numbered company (13010431 Canada Inc.), which operates as Necosmart, for five breaches of AML requirements that were uncovered in a compliance exam.

FINTRAC said its review of the firm found one “very serious” violation of AML rules — failing to report transactions when there were “reasonable grounds” to suspect that they involved money laundering — along with three “serious” violations and one breach that it classified as “minor.”

Specifically, the agency alleged that in four cases, “Necosmart failed to report suspicious transactions to FINTRAC despite known indicators of potential money laundering” — including activity that is inconsistent with a client’s financial position and transactions that are needlessly complex or involve dealings with jurisdictions with weak financial controls, among other potential red flags. 

“… while Necosmart identified some of the indicators … the organization failed to take additional measures, including a holistic review of the activity to determine whether it reached the reasonable grounds to suspect threshold,” FINTRAC said in a notice.

The other violations include alleged shortcomings in the company’s written compliance policies, failing to apply its enhanced due diligence measures to mitigate high-risk transactions and clients, and that “Necosmart’s risk assessment did not adequately assess all inherent money laundering and terrorist activity financing risks, such as those pertaining to high-risk jurisdictions and occupations.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.