Administrative monetary penalty on 13010431 Canada Inc.

 Administrative monetary penalty on 13010431 Canada Inc. Administrative monetary penalty on 13010431 Canada Inc. [ 2026-05-14 ] 13010431 Canada Inc., also operating as Necosmart, a money services business in Edmonton, Alberta, was imposed an administrative monetary penalty of $693,742.50 on March 27, 2026, for committing 5 violations. The violations were found during the course of a compliance examination. Nature of violation Violation #1 Failure to report financial transactions that occurred in the course of its activities and in respect of which there are reasonable grounds to suspect that the transactions are related to the commission or the attempted commission of a money laundering or a terrorist activity financing offence – Proceeds of Crime (Money Laundering) and Terrorist Financing Act, section 7 13010431 Canada Inc., also operating as Necosmart, failed to submit 4 transaction reports where there were reasonable grounds to suspect that one or more transactions were related to the commission or attempted commission of a money laundering or terrorist activity financing offence. This failure results in the loss of critical financial information that could have been used by FINTRAC to produce actionable financial intelligence for the investigation and prosecution of money laundering and terrorist financing offences. In these 4 instances, Necosmart failed to report suspicious transactions to FINTRAC despite known indicators of potential money laundering or terrorist financing, as outlined below: The transactional activity (level or volume) is inconsistent with the client's apparent financial standing, their usual pattern of activities or occupational information (e.g., student, unemployed, etc.). Size or type of transactions atypical of what is expected from the client. The source of funds used for the purchase of large amounts of virtual currency is unknown. Transaction is unnecessarily complex for its stated purpose. There are inconsistencies in the identification documents or different identifiers provided by the client, such as name, address, date of birth or phone number. Transaction or business activity involving locations of concern, which can include jurisdictions where there are ongoing conflicts (and periphery areas), countries with weak money laundering and terrorist activity financing controls, or countries with highly secretive banking or other transactional laws, such as transfer limits set by a government. In 3 of the 4 instances, while Necosmart identified some of the indicators outlined above, the organization failed to take additional measures, including a holistic review of the activity to determine whether it reached the reasonable grounds to suspect threshold. Violation #1 is classified by the regulations as a Very Serious violation. The imposed penalty takes into account the criteria in section 73.11 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and section 6 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. Violation #2 Failure of an entity to develop and apply written compliance policies and procedures that are kept up to date and, in the case of an entity, are approved by a senior officer – Proceeds of Crime (Money Laundering) and Terrorist Financing Act, subsection 9.6(1) and Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, paragraph 156(1)(b) FINTRAC determined that the policies and procedures used by Necosmart to fulfill its compliance obligations during the examination period were inadequate and incomplete and were not tailored to reflect the organization’s operations in practice. FINTRAC found several deficiencies in key areas, such as: Suspicious transaction reporting procedures Client identification and know-your-client processes Ongoing monitoring of business relationships Third party determination Record-keeping procedures Policies and procedures are critical to a compliance program as they communicate the important principles of compliance and standards that employees and delegated persons with compliance responsibilities must meet. Documented policies and procedures also serve to ensure clarity and consistency in business operations. Failing to develop, apply, and keep written compliance policies and procedures up to date can result in not meeting other requirements set out in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations, and undermines sound business practices designed to minimize a business’ exposure to money laundering and terrorist activity financing. Violation #2 is classified by the regulations as a Serious violation. The imposed penalty takes into account the criteria in section 73.11 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and section 6 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. Violation #3 Failure to adequately develop and apply enhanced measures to mitigate high-risk transactions and clients – Proceeds of Crime (Money Laundering) and Terrorist Financing Act, subsection 9.6(3) and Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations section 157 FINTRAC’s examination found that Necosmart failed to apply its own policies and procedures pertaining to enhanced measures. Specifically, the following examples demonstrate that enhanced measures were not being carried out in practice: The organization’s mandatory enhanced due diligence measures for higher risk clients include confirmation of address with proof from the last three months; however, this measure was not evidenced in the client file reviews. The organization’s enhanced due diligence reviews require a review of the client’s previous 3 to 6 months of transaction activities; however, in practice, FINTRAC found that Necosmart only reviewed the previous one month of transactional activity during its reviews. Necosmart also documented enhanced due diligence measures such as scanning crypto wallets, which were not being carried out in practice. Enhanced measures are additional controls and processes that an organization implements to manage and mitigate the risks associated with high‑risk clients and business areas. As Necosmart failed to carry out many of the enhanced due diligence measures it had documented, there is concern that the organization’s activities are exposed to an increased risk of money laundering and terrorist activity financing offences. Violation #3 is classified by the regulations as a Serious violation. The imposed penalty takes into account the criteria in section 73.11 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and section 6 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. Violation #4 Failure to assess and document the risk of a money laundering or terrorist financing offence, taking into consideration prescribed factors – Proceeds of Crime (Money Laundering) and Terrorist Financing Act, subsection 9.6(2) and Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, paragraph 156(1)(c) FINTRAC determined that Necosmart’s risk assessment did not adequately assess all inherent money laundering and terrorist activity financing risks, such as those pertaining to high-risk jurisdictions and occupations. Additionally, FINTRAC’s review found that while certain mitigating measures were documented, they were not carried out in practice. As a result, Necosmart failed to effectively identify and mitigate money laundering and terrorist activity financing risks, likely increasing the organization’s vulnerability to a money laundering and terrorist activity financing offense occurring. Assessing and documenting money laundering and terrorist activity financing risks ensures that reporting entities are aware of their potential exposure and vulnerability. Failing to assess and document the risks of money laundering and terrorist activity financing prevents reporting entities from identifying areas of its operations that are vulnerable to being exploited for these purposes and precludes them from putting in place appropriate mitigation measures. This can also lead to failing to identify high-risk clients and business relationships for which enhanced risk mitigation measures must be applied. This can further result in the failure to detect and report suspicious transactions to FINTRAC. Violation #4 is classified by the regulations as a Serious violation. The imposed penalty takes into account the criteria in section 73.11 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and section 6 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. Violation #5 Failure of a money services business to keep prescribed records – Proceeds of Crime (Money Laundering) and Terrorist Financing Act, section 6 and Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations paragraph 36(j) FINTRAC reviewed and assessed Necosmart’s virtual currency exchange transaction tickets for the examination period, to verify whether information about the transaction was recorded as prescribed by paragraph 36(j) and further defined by section 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. FINTRAC’s review of the virtual currency exchange transaction records found a total of 94 record keeping deficiencies. Record keeping is an essential component of a reporting entity’s compliance program as the information that it retains may provide useful intelligence to FINTRAC, which assists in combatting money laundering and terrorist activity financing. Violation #5 is classified by the regulations as a Minor violation. The imposed penalty takes into account the criteria in section 73.11 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and section 6 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations. Related link News release: FINTRAC imposes an administrative monetary penalty on 13010431 Canada Inc. Date Modified: 2026-05-14