Canadian watchdog FINTRAC: Fintechs Vulnerable to Money Laundering

July 24, 2019 | FinTech

The FINTRAC money laundering warning raises concerns for Fintech companies across Canada

Alert: FINTRAC money laundering warning in effect.

Documents obtained by The Globe and Mail reveal that fintech firms in sectors such as alternative lending, electronic payments, online gambling, and digital currencies are vulnerable to money laundering.

The Financial Transactions and Reports Analysis Centre (FinTRAC) has issued this warning and new rules around FinTech.

Anti-money laundering regulations

A major concern is fintechs’ inadequate understanding of the responsibility to prevent money laundering by Canadian regulations.

Financial companies, including fintechs, must verify clients’ identities, have in place suitable compliance systems, and report any out-of-the-ordinary or suspicious transactions.

In July, the Government of Canada also announced that local crypto exchanges must register by  June 1, 2020.

FINTRAC stretched for resources

Regulators will carry out inspections. However, the existing capacity of the regulator is only about 300 inspections a year. Meanwhile, there are 30,000 reporting companies in Canada.

So it is quite likely that some, or even a lot, of illicit transactions, could slip through the cracks unless Fintech firms exercise adequate vigilance.

Canada isn’t alone when it comes to warnings about money laundering. Federal Reserve Chair Jerome Powell has raising concerns about cryptocurrencies and Fintech operations around similar crimes.

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