As the use of cryptocurrency grows, more criminals are likely to start using it to raise, move, and conceal money outside of the established banking system, according to Canada's financial intelligence agency.
In a report published on Monday, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) stated that ransomware attacks and the concealment and cleaning of fraudulent profits are the most frequent types of criminal activity involving cryptocurrencies.
Fintrac expanded its strategic intelligence programme to increase its knowledge and comprehension of the risks and vulnerabilities related to virtual currencies by building on the funding it had received in the previous two years' budgets.
“Fintrac continues to operate in a challenging environment with new and evolving technologies and financial products, rapidly shifting global financial systems and geopolitical events constantly shaping our work,” agency director Sarah Paquet stated in the report.
Every year, the agency sifts through millions of pieces of data from insurance firms, banks, money services enterprises, securities dealers, real-estate brokers, casinos, and others to track down money linked to illegal activities. It then actively shares details on suspected cases with police and other law enforcement agencies.
Businesses that exchange foreign currencies, transfer money, cash, or buy or sell money orders or traveler's cheques, or deal in virtual currency must first register with Fintrac before offering these services to the general public.
According to the report, the continued use of unregistered money services businesses creates challenges for those attempting to discover money laundering and terrorist financing via traditional financial channels.
“Suspicious transactions reported to Fintrac have highlighted the significant role of third-party intermediaries, such as professional money launderers and money mules, in facilitating underground banking and the laundering of criminal proceeds,” the report further reads.
While the majority of illicit cryptocurrency transactions involve the laundering of criminal proceeds—a small proportion of total virtual transactions—Fintrac has observed that terrorist groups around the world are increasingly using virtual currencies to finance their operations.
This trend is especially visible among those associated with ideologically driven violent extremism, who distrust regulated and centralised financial systems. There has also been an increase in loosely connected entities within expansive movements that transcend national boundaries in recent years, as well as the persistence of cross-border funding networks and online fundraising efforts.
Additionally, the report discovered that there is a significant reliance on mixing services and high-risk exchanges for laundering cryptocurrency and converting ransoms back into cash.