A cryptocurrency company registered in British Columbia is challenging a nearly $177 million penalty imposed by Canada’s financial crime watchdog agency last month. Xeltox Enterprises Ltd. has filed an appeal in Federal Court, arguing that the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) inaccurately penalized them for breaches of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The firm contends that FINTRAC accused them of failing to report suspicious transactions, including over 7,500 transactions tied to Iran, which Xeltox claims it had no knowledge or control over. Xeltox states that it licenses its software from a Panama-based company that owns the Crytomus platform and asserts that FINTRAC misunderstood them as the same entity.
Xeltox Enterprises clarifies that it is registered with FINTRAC as a money services business under the act, and the alleged violations were committed by foreign licensees of the Cryptomus platform with no Canadian ties. FINTRAC’s director and CEO, Sarah Paquet, stated that the substantial penalty was imposed due to numerous violations involving illicit activities like child sexual abuse material, fraud, ransomware payments, and sanctions evasion.
FINTRAC highlighted 1,068 instances where Cryptomus failed to submit reports for transactions in July 2024 involving darknet markets and virtual currency wallets associated with criminal activities. The agency stressed that darknet markets and virtual currencies provide anonymity, attracting criminal elements.
In the 2024-25 period, FINTRAC issued 23 violation notices to non-compliant businesses, the highest number in a single year, resulting in penalties exceeding $25 million. Since gaining legislative authority in 2008, FINTRAC has imposed over 150 penalties.
Darknet markets serve as online platforms for illegal trade, while virtual currencies shield users’ identities, making them attractive to criminal activities. Cryptomus was penalized for failure to flag suspicious transactions and report transactions from Iran.