Canada’s anti-money-laundering watchdog says it has observed an increase in financially motivated cases of child sexual exploitation, including extortion schemes linked to organized crime.
The Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) published a new report Thursday aimed at helping businesses identify and report financial transactions associated with the sexual exploitation of children online.
The operational alert builds upon FinTRAC’s previous guidance on the topic, which was published in 2020, by leveraging findings from its financial intelligence.
“The exploitation of children is one of the most appalling crimes imaginable and it’s enabled by financial payments,” Sarah Paquet, FinTRAC’s director and chief executive officer, said in a statement.
“The enhanced indicators in our updated alert will help Canada’s financial sector detect and report transactions tied to online child sexual exploitation.”
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Sexual extortion is a form of blackmail in which the perpetrator threatens to distribute the victim’s sexual images or videos unless he or she pays or provides more sexual content.
“The motivation for sexually exploiting children varies, and while most perpetrators commit child sexual exploitation for sexual gratification and not financial gain, there has been an increase in financially motivated offending, including sexual extortion cases in recent years,” the report reads.
FinTRAC’s report provides a list of indicators for businesses to look for, such as frequent transfers of small amounts of money through peer-to-peer platforms. In the case of extortion, transaction notes may include pleas from the victim such as “delete the video” or “please stop.”
The report also notes that cryptocurrencies such as bitcoin and monero are often used to purchase such material online due to the “pseudo-anonymity” that they offer. (Unlike cash transactions, which are truly anonymous, all virtual currency transactions are recorded in a public leger known as a blockchain, although the identities behind the virtual currency wallets are hidden.) Almost all of the dark web marketplaces that sell such content require cryptocurrency for payment, according to the report.
Canada’s anti-money-laundering laws require entities such as financial institutions, real estate and mortgage brokers and cryptocurrency exchanges to report certain types of transactions to FinTRAC. The centre analyzes the information it receives and discloses financial intelligence to law-enforcement agencies.
FinTRAC said it made 57 disclosures of financial intelligence related to online child sexual exploitation in its most recent fiscal year, identifying what the watchdog called 157 “subjects of interest.”
The disclosures stemmed from a public-private partnership called Project Shadow aimed at disrupting the laundering of proceeds from online child sexual exploitation. The partnership is led by the Bank of Nova Scotia and includes the RCMP, Canada Border Services Agency, Canadian Centre for Child Protection and FinTRAC, among others.
In total, FinTRAC said it has made 300 disclosures to law enforcement since Project Shadow launched in 2020.
“The online sexual exploitation of children is a critical issue that all sectors of society need to address. Project Shadow is a positive example of the importance and value of cross sectoral collaboration,” Kimberli Hopkins, director-general of the RCMP’s Sensitive and Specialized Investigative Service, said in a statement.
Daniel Shonfeld, Scotiabank’s chief anti-money-laundering officer, said the bank is “deeply committed to tackling financial crime” by working with FinTRAC and other partners to combat the exploitation of children online.
“As an industry, we have a duty to help keep our communities safe and we will continue to support these efforts,” Mr. Shonfeld said in a statement.