Credit Cards

Feds take aim at prepaid credit cards, virtual currencies in money laundering crackdown

By: Jessica Mach on June 20, 2018

The federal government is planning to crack down on terrorism and money laundering by taking aim at the payment methods that facilitate them: virtual currencies and prepaid credit cards.

Proposed measures will focus on fixing loopholes and flaws in Canada’s anti-money  laundering system, according to a summary published by the federal government earlier this month. Public feedback about the proposed measures will be accepted until September.

These measures include requiring people and businesses that deal in virtual currencies — which include, but are not limited to, cryptocurrencies like Bitcoin and Ether — to register with Fintrac, Canada’s anti-money laundering agency. They will also be required to track and report transactions valued at $10,000 or more.

Meanwhile, prepaid credit cards will be treated like bank accounts and be subject to the same regulations. Gift cards that are issued by, and can only be used at, specific merchants or shopping centres would be exempt.

The government said that it is focusing on virtual currencies because they “are increasingly being used to facilitate fraud and cybercrime, and to purchase illicit goods and services on the dark Web,” due to how easily they can elude regulatory structures.

Prepaid cards are also frequently used for criminal activity, and are especially useful for money laundering, since many issuers do not verify the identity of card buyers. This makes it difficult for authorities and issuers to trace where the funds come from, and whether they stem from a legitimate source.

The growing popularity of financial technology, or FinTech, has made it easier for consumers to spend, convert, and transfer money — often in real time. But, the federal government said, “the new business models can complicate monitoring as well as make it difficult for authorities to follow the money trail.”

The summary adds, “Transactions conducted through the Internet allow a certain degree of anonymity that can potentially be exploited by money launderers or terrorist activity financiers.”