What is a currency exchange and why are there so many of them?

Visitors to the bustling Central Lonsdale area of North Vancouver these days often end up asking the same two questions: what is a currency exchange and why are there so many of them?

That much is clear looking at a Reddit group focused on North Vancouver.

Here’s one recent comment: “Tonight, I was out for a walk and just for fun, I decided to play Currency Exchange Scavenger Hunt. Between London Drugs and 3rd, I counted 14 of them (!). May have missed a few.”

Here’s another: “Lonsdale Avenue, 20-plus years ago, was a lot more interesting. I remember small independently owned shops more akin to what you used to find on Commercial Drive here. There were music stores, jewelry stores, and clothing places; it was INTERESTING. These days, like everywhere else, it seems increasingly sterile and boring, with the same recurring businesses every block.”

Those are just a couple of the many comments voicing concerns about the recent increase in the number of currency exchange businesses on Lonsdale Avenue, predominantly run by Iranian-Canadians, with many people wondering if the businesses are even legal.

And it’s not just members of the public noting the issue. City of North Vancouver Coun. Shervin Shahriari brought it up at a recent council meeting.

“During our council meeting on April 22, I mentioned that I believe the number of currency exchanges doesn’t align with our population,” he said. “I suggested that we accelerate strategies to manage the proliferation of these businesses. They don’t activate our streets or create a vibrant environment.”

But what exactly is a currency exchange?

Imagine a marketplace of currencies where dollars can become euros, yen can transform into pounds, and rupees can turn into dirhams. This is the world of currency exchange, a regulated hub allowing individuals to trade one form of currency for another.

Not the same as a bank

“We offer services including currency exchange, wire transfers – both internal and external – money orders, and cashing government checks,” said Iraj Bakhshy, the owner of North Vancouver’s Monex1 Exchange. “We also have the facilities to obtain gold bars and coins in Iran and provide customers with Canadian dollars in Canada.”

According to the B.C. government, money services businesses (MSBs) are separate from traditional financial institutions like banks or credit unions. They provide a range of financial services to British Columbians, such as foreign exchange dealing and money transfers.

“The increase in MSBs is attributed mainly to the growth in diaspora communities, which need ways to send and receive money from countries that are often highly regulated and restricted or don’t have banks connected to Canadian financial systems,” said Rebecca Vaughan, civic engagement manager of the City of North Vancouver, citing the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

However, Dina Ser, the director of Hafez Exchange, one of the longest-running currency exchange businesses in North Vancouver, believes that a “low, and sort of non-existent, barrier to entry” into the currency exchange world is the main reason behind the surge in the number of businesses. Ser believes her industry needs more regulation.

“To open an MSB, you just fill out a form online, and then you can handle money on clients’ behalf, hold funds in trust, receive and make payments, and basically act like a financial institution,” she said. “However, just filling out a form for such a big responsibility isn’t good enough. We need better oversight and rules to make sure everyone follows the regulations and avoids risks for the public.”

Questions of legality

As for suggestions that currency exchanges are doing something illegal, the City of North Vancouver works with provincial and federal authorities to ensure all business operators are working legally, explained Vaughan.

“Each business licence application for money services in the financial services category in the city is verified to confirm the business is registered and in good standing with FINTRAC,” she said. “During the business licence renewal process each year, these businesses are re-verified with FINTRAC.”

That, however, doesn’t stop members of the public from questioning the legality of the businesses.

“I receive many emails from community members about the nature of the activities that are happening in exchange bureaus,” said Shahriari. “Still, they continue to operate unless the RCMP investigates and finds that a business is illegal. If somebody has evidence of illegal activities by these businesses, they really should report it to the RCMP.”

Ser said she believes the growing concerns of locals regarding money laundering activities within their business may have some validity, although there are many legitimate reasons for the operation of currency exchanges.

“Canadians may not understand the struggle of immigrants because [Canadians] can easily move their money through banks thanks to their solid economy and country,” she said. “Unlike many immigrants, they haven’t had to face the challenges of selling everything, leaving their home country, and starting afresh. Many Iranians immigrate to Canada in their 40s and 50s and struggle to find new jobs. They often rely on income from Iran, which they transfer monthly to support themselves in Canada. This is the reason why there are numerous currency exchanges in the community.”

Furthermore, Ser said that if any business were involved in money laundering, it would be unlikely for them to operate with such visible storefronts.

“While it’s possible that some of these businesses may not fully operate within FINTRAC regulations, I hesitate to label all of them as money launderers,” she said. “There are so many MSBs because of the limited occupation options available to immigrants. For example, I know of an exchange place where the owner was a licensed physician in Iran. After immigrating to Canada in his 50s, he had to seek alternative livelihood means. The real big-money launderers typically avoid such establishments or registering for a licence to maintain their cover, especially because all registered MSBs get audited by FINTRAC within certain periods.”

Bakhshy expressed similar thoughts, stating that Iranian immigrants transferring money to Canada benefits both the Canadian macroeconomy and microeconomy.

“This is also advantageous for the local community on the North Shore,” he said. “To better understand Iranians’ challenges, imagine waking up one day to find that you no longer have access to any banks and cannot move your assets. This underscores the significance of these currency exchange businesses.”

The large number of currency exchanges on Lonsdale Avenue makes it appear to be a very North Vancouver issue, but it is happening in many other communities as well, said Shahriari.

City exploring options for Lonsdale Avenue

“I believe that if you look at other municipalities in Canada, even those in Ontario like the Greater Toronto Area, as well as in our immediate vicinity, such as Burnaby, Vancouver, and Surrey, you’ll find similar currency exchanges,” he said. “I’ve heard that at least one other municipality, West Vancouver, is considering measures to limit their numbers. Because of this, I think we may need to accelerate our timelines to address this issue. If nearby municipalities impose restrictions, new applications will likely end up in our city.”

The City of North Vancouver is in the early planning process of a Lonsdale Great Street project that will help shape the future of the Central Lonsdale area, said Vaughan. The process will include many opportunities for residents to offer opinions on what they want to see, or do not want to see, in the area.

“The ongoing work on the Lonsdale Great Street project will offer our residents and businesses a significant opportunity in the upcoming months to provide input on the area’s commercial aspects, including the expectations for business operations at the street level,” she said. “We will encourage the community to be actively involved in providing input to that process later this year.”

Fatemeh Falah is an intern reporter with the North Shore News. She can be contacted at [email protected].