The federal RCMP’s Northwest Region money-laundering unit announced the charges against the Sarrafis on Monday.Adrian Wyld/The Canadian Press
Two cousins have been accused of defrauding Canada’s major banks in order to launder more than $40-million from the Middle East through their currency-exchange business, which was popular among Iranian Canadians in cities such as Vancouver and Calgary.
The defunct Canex Forex Ltd. and its former co-owners, Kevin and Saba Sarrafi, are facing a total of 29 fraud and money-laundering offences dating back to 2018.
Kevin Sarrafi, 39, had his court appearance in Calgary adjourned Monday until early August. The RCMP says it does not know the whereabouts of Saba Sarrafi and has issued a Canada-wide warrant for the arrest of the 45-year-old, whose last known address was in the Vancouver suburb of Coquitlam.
The federal RCMP’s Northwest Region money-laundering unit announced the charges in a news release Monday, a week after The Globe and Mail asked the force for comment on the charges sworn April 10.
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The Mounties allege the cousins and their currency exchange used “a complex network of shell companies and third-party banks accounts” to deliberately defeat Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act and bring millions of dollars in from the United Arab Emirates.
The RCMP declined The Globe’s interview requests. Kevin Sarrafi, who is representing himself according to court files, did not answer a cellphone associated with him or respond to requests for comment sent to one of his e-mail addresses. Saba Sarrafi did not answer a cellphone associated with him.
The case offers a window into the challenges Canada faces in regulating a recent spike in currency-exchange businesses at a time when Ottawa’s escalating sanctions on Iran have made it increasingly onerous for members of the Iranian diaspora to send or receive funds to or from that country through mainstream financial institutions.
As more banks eschewed those financial transactions, other financial intermediaries, including currency exchanges, also known as money-services businesses, or MSBs, took their place. These exchanges must register with The Financial Transactions and Reports Analysis Centre of Canada, or FinTRAC, but that agency says this approval is not akin to an endorsement or licence for that particular business.
FinTRAC, which passes along evidence of suspicious transactions or practices to the relevant investigative authorities, says it can only revoke a registration of any of Canada’s 2,778 MSBs if the business or its owner refuses to answer its requests or has been convicted of a crime.
Saba Sarrafi is still listed as director of a virtual currency exchange, BitCanex, that is registered with FinTRAC as operating out of the same West Vancouver storefront that once housed Canex Forex. Last week, a cashier at that storefront, which is now named something completely different, said Saba Sarrafi is no longer the owner of the business operating there.
Online records suggest Kevin Sarrafi created a website for CanexForex.com a dozen years ago. But the alleged fraudulent transactions he and his cousin are accused of making all occurred between the start of 2018 and the end of March, 2020, according to a charge sheet provided by staff at the Provincial Criminal Court’s Calgary location.
Around that same time, in April, 2020, Coquitlam RCMP seized $85,000 in bundles of cash after FedEx froze two shipments that Saba Sarrafi allegedly had tried to send to one of his employees from the Calgary Canex Forex location.
British Columbia’s Office of Civil Forfeiture targeted this cash because it alleged it was the proceeds of criminal activity. In its lawsuit, the agency alleged Saba Sarrafi initially showed up to the RCMP detachment to try to recover the money with a “translator” who turned out to be a former Vancouver realtor convicted in the United States for international money laundering.
The B.C. agency, which has to meet a lower bar to seize assets than in a criminal case, discontinued its lawsuit a year later, in 2021, but last week declined to elaborate on why it had done so.
The Cullen Commission of Inquiry into Money Laundering in B.C. noted there are significant money-laundering risks associated with MSBs and more informal value transfer systems including the money-exchange practice known by the Farsi term of “saraf” in Iran.
When banks shutter the accounts of MSBs, some “operate underground” to evade the authorities, the commission’s 2022 report says.
MSBs that fail to register risk administrative fines and being reported to police: “We’ve significantly ramped up our non-compliance disclosures to law enforcement – with an eye particularly on MSBs,” said Darren Gibb, FinTRAC’s head of communications, in an e-mail.
In fiscal 2024-25, FinTRAC made 32 of those disclosures to police, up from 14 in the prior year.
Some municipalities have also tried to rein in the risks posed by this industry, with the City of North Vancouver barring any new currency exchanges from opening up at street level.
FinTRAC is also about to publish updated requirements for banks, MSBs and other regulated businesses about conducting enhanced monitoring, due diligence and recordkeeping of funds flowing to or from Iran, as it records a sharp increase in suspicious transactions from the sanctioned country.
Iran has been ruled as a theocracy since the 1978-1979 revolution that deposed Shah Mohammed Reza Pahlavi, a monarch who was allied with the United States and other Western countries. The country became an Islamic Republic led by clerics. It has been ruled by Ayatollah Ali Hosseini Khamenei since 1989.
Financial intelligence agencies in Canada and other countries are intensifying their attention on Iran in the wake of Israeli and U.S. bombing of Iranian nuclear sites and Tehran’s retaliatory missile attacks on Israel.
Money-service businesses, along with other regulated companies, are also required to verify the identities of clients who send or receive funds or cryptocurrency in transactions that flow to or from Iran.
Ram Joubin, a Vancouver lawyer who co-founded StopIRGC, a volunteer group that accepts and investigates public tips about suspected Iranian officials living in Canada, said criminal cases against currency exchanges are very difficult to prosecute.
Mr. Joubin said his grassroots collective met with someone about Canex Forex more than two years ago and investigated their allegations that the company was laundering money. StopIRGC then forwarded evidence to the authorities in a relatively quickly manner, he said.
“You can see how long it’s taken and then you can see how rare it is,” he said.
With research from Stephanie Chambers and Rick Cash
