Canada plans to ban crypto ATMs used in fraud

Canada ranks first in the number of crypto ATMs per capita with almost 4,000 machines running across the country, from Halifax to Vancouver, and, according to the nation's own financial intelligence unit, its leading role has come with a price namely, the suffering of scam victims throughout the country.

Analysis of suspicious transactions conducted by Canada's FINTRAC, a financial intelligence agency, in February 2023, crypto ATMs have become the preferred tool for scammers who steal and transfer funds from scam victims in Canada.

Canada finds itself in a difficult situation: not only does the country have more of such machines per capita than anywhere else in the world, but it does so without any regulatory framework for this sector.

The machines currently fall under the same regulatory category as foreign exchange dealers and money-transfer services such as Western Union, a designation called a 'money services business (MSB), which critics say is wholly inadequate for a technology that moves funds instantly and anonymously.

The appeal to criminals is structural. Transactions are processed quickly, no bank account is required, and most deposits under $1,000 need only a phone number to complete. Unlike a bank branch, there is no human teller trained to recognise the warning signs of a fraud in progress.

A CBC News investigation found that this low-barrier design, marketed as convenience for ordinary users, has made crypto ATMs the instrument of choice for laundering proceeds from romance scams, emergency scams, and investment fraud targeting Canadians.

With more than 39,000 machines operating globally, the problem extends well beyond Canada's borders. But Canada's per-capita density makes it a particular focal point for reform advocates and, apparently, for fraudsters.

Canada is not the first jurisdiction to confront this issue, it is one of the last among its peers to do so. The United Kingdom effectively shut the industry down in 2021 by building a licensing framework that has yet to approve a single operator.

New Zealand is currently advancing a proposed ban. Australia introduced daily transaction limits last summer following a joint investigation by its financial intelligence agency and law enforcement. In the United States, roughly half of all states have proposed or enacted measures including daily transaction caps, limits on operator fees, and mandatory refund requirements for confirmed scam victims.

Canada's federal government was asked to respond to the FINTRAC findings last fall. Finance Minister François-Philippe Champagne declined a formal interview but told CBC on Parliament Hill that the government was "looking at all options to prevent financial crimes". His fall economic update referenced a proposed ban on crypto ATMs but offered few specifics beyond a commitment to still allow Canadians to buy digital currency through brick-and-mortar money services businesses.