Sber bank's headquarters in Moscow. A number of Russian banks were barred from the SWIFT system after the country’s invasion of Ukraine in 2022.ALEXANDER NEMENOV/AFP/Getty Images
Businesses associated with the adult entertainment industry are using Canadian payment service providers to transfer money overseas and circumvent sanctions imposed against Russia by Western countries, according to a financial intelligence report.
The confidential document – entitled “Russia-linked Money Laundering through Intermediary Jurisdictions” – was prepared by the Financial Transactions and Reports Analysis Centre of Canada. Known as FinTRAC for short, the federal financial intelligence unit plays a role in sanctions enforcement.
Dated March, 2023, the report sheds light on the furtive flow of funds to Russia-linked individuals and entities through Canada and other countries, in violation of economic measures designed to isolate Russia as it wages war in Ukraine.
Strengthening Canada’s ability to enforce sanctions against Russia has taken on new urgency. Washington’s support for Ukraine is wavering as Ottawa imposes new sanctions targeting the “shadow fleet” of vessels being used by Russia to dodge trade restrictions and fund the Kremlin’s war machine.
Specifically, FinTRAC warns in the report that “a large number” of digital marketing companies, many of which are linked to the adult entertainment industry, are being used to shuttle funds to and from Canada for the benefit of blacklisted Russian entities.
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“In looking at patterns of potential international money laundering, FINTRAC observed businesses linked to the adult entertainment industry using Canadian payment service providers to transfer funds internationally and possibly evade sanctions against Russian financial entities,” the report states.
The redacted document was recently obtained by Ottawa-based researcher Ken Rubin through a request made under the Access to Information Act.
FinTRAC identified 14 of these digital marketing companies in one examination, the report said. It noted that most of the transactions involved an unidentified entity using a Canadian payment service provider conducting “non-SWIFT” electronic funds transfers.
SWIFT, or the Society for Worldwide Interbank Financial Telecommunications, is a secure payment messaging system used by more than 11,000 banks around the world.
After Russia’s invasion of Ukraine in 2022, a number of Russian banks were barred from the SWIFT system. Russia, however, is promoting an alternative platform, the System for Transfer of Financial Messages, as a workaround for its banks.
Although details about the destination and the value of the non-SWIFT EFTs were mostly removed from the FinTRAC report, the document states the transactions were conducted between February and June, 2022. That time frame coincides with the initial months of Russia’s invasion of Ukraine and the period just before and after the imposition of sanctions on Russia.
Most of the payments were sent to banks in unidentified countries, according to the report. Another section of the document, however, provides some details about money flows involving Britain.
“Some of these digital marketing companies were observed receiving funds from financial entities in third countries, including a UK payment service provider that had five Russian nationals listed as company officers,” the document reads.
It cites a disclosure made by Britain’s Joint Money Laundering Intelligence Task Force in July, 2022. At that time, the task force indicated that transactions involving British payment service providers partly owned by Russian nationals “could be indicative of suspicious payments linked to sanctions evasion by Russian elites and enablers,” FinTRAC’s report stated.
A subsequent section of the document outlines certain details about FinTRAC’s examination of transactions involving unspecified entities between February and June, 2022.
It found that clients using “Canadian non-resident accounts” – a term that generally refers to accounts at domestic banks opened by individuals who do not live in Canada – sent 1,017 transactions totalling almost $73-million during those five months in 2022.
That marked increases of 37.7 per cent and 75.4 per cent, respectively, for transaction volumes and values from the 633 transactions totalling $18-million that were recorded for the same period in 2021.
The report further states that suspicious transaction reports submitted to FinTRAC by a Canadian payment service provider in 2022 indicate “that at least one company linked to the adult entertainment industry was being used to facilitate the movement of funds and evasion of sanctions by Russian actors.”
Although the financial intelligence report makes no specific mention of sex trafficking, FinTRAC has separately linked the adult entertainment industry to the for-profit sexual exploitation of women and girls. The Canada Anti-Human Trafficking Consortium, meanwhile, has analyzed advertisements posted in online forums to measure that activity in Canada.
Money launderers and sanctions evaders also commonly use anonymous shell companies in so-called “intermediary jurisdictions” to move illicit funds, according to FinTRAC’s report.
A shell corporation is a business that exists purely on paper. Despite its lack of operations, these corporate entities can be used to open bank accounts and send money abroad.
Other common techniques used to evade Russian sanctions include the use of cryptocurrencies and abuse of the international trading system, the report said.
Canada, which has been previously criticized for its failure to find and freeze dirty money, has taken steps to enhance sanctions enforcement, including by providing new powers to FinTRAC last year.
During its 2024-25 fiscal year, FinTRAC generated 59 disclosures of “actionable financial intelligence” to police and national security agencies that touched on money laundering associated with sanctions evasion involving a range of countries. Of that total, two disclosures related to stand-alone sanctions evasion.
Earlier this month, the RCMP announced the arrest of a Canadian businessman for exporting banned technology to Russia.