A cryptocurrency firm incorporated in British Columbia is appealing a penalty of almost $177 million issued by Canada’s anti-money-laundering agency last month.
Xeltox Enterprises Ltd. says in an appeal filed in Federal Court that the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) penalties for violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act were based on “errors of law.”
The company says FINTRAC found the company in violation for failing to report suspicious transactions, including more than 7,500 with connections to Iran, over which Xeltox claims it had “no knowledge or control.”
The appeal says Xeltox licenses its software from a Panama-based company that owns the Crytomus platform, and FINTRAC “misapprehended” them as the same entity.
Xeltox Enterprises says it’s 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 connection to Canada.
FINTRAC director and CEO Sarah Paquet said in a statement last month that “numerous violations” in the case involved child sexual abuse material, fraud, ransomware payments and sanctions evasion, leading to the record penalty issued against the firm.
The agency had found 1,068 instances where Cryptomus did not submit reports for July 2024 transactions involving known darknet markets and virtual currency wallets with ties to the criminal activity Paquet described.
Darknet markets are online and often anonymous platforms where illegal goods and services are sold. Virtual currencies also mask the identity of their holder, making both them and the darknet markets havens for criminal activity.
FINTRAC said Cryptomus didn’t just violate money laundering laws when it failed to flag suspicious transactions, it also committed a violation when it failed to report 7,557 transactions originating from Iran between July 1 and Dec. 31, 2024.
In 2024-25, FINTRAC issued 23 violation notices to businesses that didn’t comply. It was the largest number of notices issued in one year in its history and amounted to more than $25 million in penalties.
FINTRAC has imposed more than 150 penalties since it received the legislative authority to do so in 2008.
