OTTAWA -- The federal government is proposing measures that take aim at shadowy payments made by terrorists and money launderers using virtual currencies and prepaid credit cards.

The planned regulations would help close loopholes in Canada's anti-money laundering regime and address shortcomings pointed out by an international watchdog.

Virtual currencies, such as Bitcoin, are increasingly being used to commit fraud and cybercrime and to buy illicit goods and services in the darker corners of the internet, notes a federal summary accompanying the proposed changes.

"They allow for the rapid transfer of funds within or across borders, oftentimes without any intermediary, are generally characterized by non-face-to-face customer relationships, and can circumvent the physical 'brick and mortar' financial system entirely."

The measures would impose new reporting obligations on people and businesses dealing in such cryptocurrencies.

Like more traditional money service businesses, they would have to register with Fintrac, Canada's anti-money laundering agency, as well as keep track of virtual currency transactions of $10,000 or more.

Prepaid credit cards can be abused because it is difficult to trace the origins of money loaded to them, the government says.

Under the changes, prepaid cards would be treated like bank accounts, meaning issuers would need to verify the card purchaser's identity, keep records and report any suspicious dealings.

The measures would not apply to gift cards tied to specific retailers or shopping centres.

The planned changes represent an attempt by regulators to keep up with the dawn of new financial technologies to deliver services more conveniently.

"While providing benefits to consumers, the new business models can complicate monitoring as well as make it more difficult for authorities to follow the money trail," the federal summary says.

The overall goal is to ensure banks, money service businesses and others who provide access to the financial system know their customers and keep good records, the summary adds.

"Such information could assist in the investigation, apprehension and prosecution of money launderers and terrorist financiers."

The proposals come as the RCMP makes the fight against money laundering "a key strategic priority" for its federal policing branch by "elevating the priority" of the crime, according to an internal memo released under the Access to Information Act.

Other proposed changes would:

-- Require foreign money service businesses to report suspicious transactions to Fintrac, ensuring a level playing field with domestic businesses;

-- Force financial institutions to confirm the accuracy of any new ownership information about companies as it comes in, a measure intended to prevent firms from hiding the identities of their true proprietors;

-- Impose stricter record-keeping and reporting requirements on the life insurance sector, which has begun issuing mortgages and loans against the amount of a policy.

The government is accepting public comment on the planned measures until early September.