A recent report by Canada’s financial intelligance unit, FinTRAC, sheds light on the growing concern of Bitcoin ATMs being exploited by criminals for money laundering activities. The report indicates that the anonymity associated with cash deposits into these ATMs makes them an attractive tool for illicit purposes.

According to the advisory released by FinTRAC, suspicious transaction reports have revealed connections between cryptocurrency ATMs and various criminal activities, including fraud, sex trafficking, and cybercrimes like hacks. The analysis of blockchain data further uncovered suspicious transactions linked to virtual currency exchanges in countries with weak anti-money-laundering controls and economic sanctions.

In Canada, companies dealing in virtual currencies, including operators of Bitcoin ATMs, are classified as money services businesses (MSBs) under anti-money-laundering laws. These businesses are obligated to report specific transactions, particularly those deemed suspicious or involving significant amounts of cash or virtual currency, to FinTRAC. Failure to comply with reporting requirements can result in severe penalties, as exemplified by a recent $6-million fine imposed on Binance Holdings Ltd., the world’s largest cryptocurrency exchange.

The advisory issued by FinTRAC aims to assist Bitcoin ATM operators in identifying and reporting suspicious transactions. The watchdog highlighted red flags such as the depositing of small amounts in large volumes and subsequent transfers to dark web marketplaces for illicit purchases. TRansactions occurring during late hours were also flagged as suspicious, with hot spots for such activities identified in major Canadian cities.

To combat illicit activities, FinTRAC emphasized the importance of enhanced due diligence by Bitcoin ATM operators, including the use use of blockchain analysis tools to identify risky transactions. The watchdog also advised vigilance towards indicators like depositors receiving instructions during transactions, suggesting potential criminal involvement.

In light of these findings, it is crucial for the cryptocurrency community to prioritize compliance with anti-money-laundering regulations and adopt proactive measures to mitigate the risks associated with the criminal use of Bitcoin ATMs.