Online Gold and Silver Transactions Could Attract Money Launderers and Terrorists

By Matthew Harwood

A classified report from Canada's financial analysis center warns that Web sites that convert cash into units of gold and silver for online transactions have the potential to open a new avenue for money laundering and terrorist financing, reports The Globe and Mail.

In the 21-page report, obtained by an Access to Information Act request, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) says that although these Web sites run by "digital precious metal operators" fulfill a legitimate demand, the anonymity they provide to their customers make money laundering and terrorist financing a real concern.

Even if FINTRAC could compel operators of digital metals accounts to turn over their records, the report suggests its analysts would be hard pressed to follow the money. That's because digital metals accounts aren't tied to bank accounts that verify customer information, the report says. Business is conducted almost entirely over the Internet, and websites rarely, if ever, verify the identity of their clients in person.

Companies that offer electronic gold or electronic silver accounts don't actually transfer funds in and out of accounts they create. That's done by "digital currency exchange services," complicating the money trail even more.

By using these Web sites, money launderers can evade traditional banking institutions and services which are required to report suspicious activity to their governments under regulations put in place after 9-11.

While no Web sites have colluded in criminal activity as of yet, FINTRAC says they have identified suspected money-laudering transactions involving digital precious metal operators.

By the end of the year, The Globe and Mail reports, Canada will require precious metal and stone dealers—both physical and digital—to register with the government.


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