Canadian banks raise concerns about possible money laundering at QuadrigaCX

23 Feb, 2019
by Joeri Cant
Canadian banks raise concerns about possible money laundering at QuadrigaCX

Canadian banks are uncomfortable handling money from QuadrigaCX, saying that the uncertain origin of the funds raises concerns about possible money laundering activities.

QuadrigaCX, had been unable to access more than $25 million of its funds since January 2018, when the Canadian Imperial Bank of Commerce decided to freeze several accounts belonging to Quadriga’s payment processor, known as Costodian.

The bank said it was unable to determine who the funds belonged to, so it turned to the courts for help.

Read more: Vancouver crypto exchange & CIBC clash in court over frozen crypto accounts

Last Friday, the Nova Scotia judge issued an order for the eventual disbursement of more than $30 million that belonged to the insolvent QuadrigaCX trading platform.

According to CBC, lawyers for the Bank of Montreal and the court-appointed monitor overseeing the case, Ernst and Young, showed concerns about possible money laundering activities and added that the banks are uncomfortable handling money from QuadrigaCX.

Elizabeth Pillon, a lawyer representing Ernst and Young, made it clear that the banks have found themselves in uncharted territory.

'I don't blame them for hesitating', she said, adding that there were concerns about possible money-laundering issues.

'We don't have the source-of-funds information that the banks are looking for', she told the court. 'The monitor has serious concerns about finding another institution to hold these funds.

Read more: 5 conclusions of the QuadrigaCX hearing

Judge Wood of the Nova Scotia Supreme Court issued an order that will eventually see the QuadrigaCX money deposited in a Royal Bank account, which Ernst and Young will utilize to pay for the ongoing court proceedings.

However, the Royal Bank expressed 'hesitation' about accepting and distributing the money without direction and relief from the court. Both the Royal Bank and the Bank of Montreal agreed to transfer the funds, but included clauses which are aimed at limiting their liability while carrying out their duties.

The judge responded by saying that the banks provisions may have gone too far. 'There's always business risks in everything you do', he told the lawyers.

Community asking for Canadian regulatory oversight for crypto exchanges

Several lawyers who are active in the area of blockchain technology, stated that the loss of about $190 million of investor money resulting from the death of the founder of the cryptocurrency exchange, Gerald Cotton, clearly indicates the regulatory gaps and necessity for better oversight.

'I think Quadriga CX is going to be the case that turns things in Canada and kick-starts regulation because this problem could very well happen again', Chetan Phull, a Canadian lawyer said.

Read more: Coinbase CEO Brian Armstrong shares his views on QaudrigaCX

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