Canada is an attractive jurisdiction due to the flexible requirements set by the government for financial services companies, compliance with global regulatory standards, and a high level of legal protection. Gofaizen & Sherle provides professional support and obtains a Canadian MSB license with a turnkey solution and guarantee
Financial businesses that provide services to customers are required to comply with Canadian law to help the government detect criminal activity and combat money laundering.
There are two types of financial businesses that must comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) obligations in Canada: the Foreign Money Service Business (FMSB) and the Money Service Business (MSB).
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An FMSB is a non-bank financial institution that provides financial services and may be located outside of Canada, while an MSB provides financial services domestically. Both categories must be registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and comply with their reporting and recordkeeping obligations under the PCMLTFA.
Businesses will be an MSB (money services business) if the following criteria can be applied to them:
In addition, your company may be designated as an MSB in the following cases:
According to FINTRAC, individuals or legal entities that provide bill payment services or process payments for goods and services can transfer funds or trade in virtual currencies.
Businesses will be an FMSB (Foreign Money Services Business) if certain criteria can be applied to them.
You provide any of the services that qualify as an MSB, but at the same time:
|Type of currency: fiat and crypto||Works with Canadian currency||Works with foreign currency|
|Type of services (services offered include currency exchange operations, sending and receiving funds, producing and exchanging orders for funds or other instruments, trading digital currencies, and providing software solutions for crowdfunding)||Yes||Yes|
|Necessity of registration||Yes||Yes|
|The necessity of a license||Yes||Yes|
|Control of activities||The Federal Anti-Money Laundering Authority (FINTRAC)||The Federal Anti-Money Laundering Authority (FINTRAC)|
|Customer base||Individuals and legal entities||Individuals and legal entities|
|Availability of a local address||Yes||No|
|Presence of local employees and agents||Yes||No|
|The actual presence of beneficiaries/directors||No||No|
|Branch offices in Canada||Yes||No|
|The actual presence of a local compliance officer||Yes||No|
|Examples||Western Union,MoneyGram||PayPal, Stripe|
If you are acting solely as an MSB agent and only provide one or more MSB services, you are not considered an MSB or FMSB. Provided the MSB company on whose behalf you are acting is registered.
You are also not considered an MSB or FMSB if you conduct MSB activities in the course of providing another type of service. In doing so, your company reports to the appropriate authorities.
Choose the best package of services for obtaining a MSB license in Canada
With registering a company in Canada and corporate bank account opening
Initial set up
With registering a company in Canada
Initial set up
Getting the MSB license on the already operating company in foreign country
Initial set up
Senior Partner, Consultant
Senior Associate, Consultant
It should be noted that AML Officer we are providing is a full-fledged specialist who will participate operating activities in your company for up to 5 working hours per month. Moreover, such employee shall increase sustainability of your business activity in Canada within a long-term perspective.
After 8-10 weeks company will be fully registered as a Money Services Business and 2-3 weeks will be required extra to become fully operative and open a Bank account
Result: Gathering basic information from the client; providing a preliminary set of documents for further execution of the power of attorney; clarity on project scope and budgets.
Result: The company is registered under the approved name; the legal address is registered.
Result: A corporate account is opened and the organization complies with the requirements of the tax authorities, as well as the supervisory authority as a provider of virtual assets.
Result: Submitting documents for an MSB license. A functioning company in the legal framework of Canada
Result: Obtaining an MSB licence and the appearance of the company in the registry of licenses
Companies that provide financial services in Canada must strictly comply with laws that regulate money laundering, criminal activity, and financing of terrorism.
They must register with FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) and comply with the requirements set out in the Proceeds of Crime and Terrorist Financing Act (PCMLTFA).
FINTRAC is Canada's financial intelligence unit established to combat money laundering and terrorist financing and serves as one of the Department of Finance's key internal partners in the Canadian regime (AML/ATF). FINTRAC is responsible for analyzing financial transactions and reports filed by registered companies and ensuring timely detection and prevention of possible money laundering and sponsorship of terrorism.
The Proceeds of Crime and Terrorist Financing Act seeks to combat cross-border criminal transactions that facilitate money laundering or finance criminal activities. The law establishes standards and requirements that must be met by companies providing financial services and establishes controls and penalties for violations of these requirements.
Canada's anti-money laundering and counter-terrorist financing laws are among the strictest in the world. Companies that do not comply with its requirements can face serious fines and criminal liability. Therefore, it is recommended that all money service businesses ensure full compliance with Canadian law, cooperate with FINTRAC, and regularly train their staff on anti-money laundering and combating the financing of terrorism.
Companies with an MSB license in Canada have the following responsibilities:
Tax laws and standards play a key role in regulating cryptocurrency activities. In Canada, cryptocurrency is not defined as an official means of payment but has the status of an asset. This means that virtual currency transactions are subject to the Income Tax Act (ITA). The rate depends on the annual income: from 15% to 33%.
If a customer pays for a service or commodity with cryptocurrency - this has the status of a profitable (barter) transaction. Such "goods" should be included in the seller's income for tax purposes. Cryptocurrency entrepreneurs must consider the tax rates of the province where their company will operate and convert the value of cryptocurrency to CAD for tax purposes to confirm the transaction to the IRS.
The most advantageous tax treatment is given to companies registered in British Columbia, located on the west coast of Canada. Taxation here has the following features:
In addition, the Canadian government recommends that entrepreneurs regularly compile reports on cryptocurrency activity and report profits or losses in their returns.
Reporting is an integral part of cryptocurrency activity in Canada. The Canadian government recommends that all entrepreneurs regularly report their cryptocurrency transactions for tax purposes.
Under the Income Tax Act (ITA), when profits from cryptocurrency activities are taxed as profitable businesses - 100% of earnings are taxed. Only 50% of a company's profits are taxable if capital gains are reported for tax purposes. Therefore, entrepreneurs involved in cryptocurrency transactions are required to carefully track and report their profits and losses from buying, exchanging, or selling digital currencies on their returns. The report must also include the date of the cryptocurrency transaction and the price in Canadian dollars at the time of the transaction.
FINTRAC has the authority to issue Administrative Monetary Penalties (AMPs) to organizations that do not comply with the PCMLTFA and related regulations. This is a measure that helps ensure compliance and protect Canada's financial system from misconduct such as money laundering and terrorist financing. If an organization fails to comply with the law, it could face fines of up to several million dollars.
In addition to administrative monetary penalties, FINTRAC may also impose other penalties on violators. For example, an organization may be ordered to correct violations, and FINTRAC may request additional information or documentation from the organization. If an organization fails to correct violations or cooperate with FINTRAC, it may face criminal charges.
As such, regular compliance is an important element of business strategy for companies engaged in financial activities in Canada.
AML risks for MSBs include the possibility that their services may be used for money laundering, terrorist financing, and other illegal activities. MSBs may also fall victim to scams and attacks by hackers who may use their services to commit unlawful acts.
Violations of AML rules can lead to serious consequences for MSBs, including fines, license revocation, and criminal prosecution. Therefore, MSBs must take effective steps to reduce money laundering risks and ensure compliance with AML laws.