Canada MSB License
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 in obtaining a Canadian MSB license with a turnkey solution!
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).
An MSB is a non-bank financial institution that provides financial services within Canada, while an FMSB is also a non-bank financial institution that may be located outside of Canada and provides financial services.
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.
Who is an MSB (Money Services Business)?
Businesses will be an MSB (money services business) if the following criteria can be applied to them:
- You provide clients with at least one MSB service, namely: currency transactions; transactions involving the exchange of one type of currency for another; funds transfers, including bank card transfers; mediation of financial transfers from one legal entity or individual to another; mediation between the payer and the payee to pay bills, utilities, wages, mortgages, loans, etc. (except accepting payments on behalf of the payee, which is used exclusively to pay debts, while giving payment instructions to the first person).
- You issue or redeem money orders, traveler’s checks, or other similar negotiable instruments (other than cashing checks written to a particular person or solely by selling traveler’s checks to another company that issued them).
- You provide services related to virtual currency, such as: exchanging fiat currency for virtual currency; exchanging virtual currency for another virtual currency; transferring or receiving virtual currency; providing or maintaining a crowdfunding platform for raising finance or virtual currency.
- You do business in Canada; have a Canadian physical office; have hired employees, and agents in Canada; have opened a branch office in the country.
In addition, your company may be designated as an MSB in the following cases:
- If you hold a license (permit) or are registered as a business that relates to at least one of the services described above.
- You attract customers with the above services through advertising in the media, the Internet, outdoor advertising, etc.
- You advertise (by any means, including newspaper, television, yellow pages, Internet, any other media, or through outside advertising) that you are participating in any of the above services.
- Or you do not advertise services, but you provide financial remittance services; foreign exchange transactions of more than $1,000 in a single transaction with a single customer; services to issue and redeem money orders, traveler’s checks, or other instruments of more than $1,000 per transaction with a single customer (one transaction may include two or more transactions of less than $1,000 each, but the total value must be $1,000 or more), you pay taxes on profits from any of the aforementioned services.
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.
Who is an FMSB (Foreign Money Services Business?
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:
- You do not have a place of business in Canada, namely, you have no Canadian registration, no physical presence, and no employees, agents, or affiliates in Canada.
- Your business provides services to individuals or entities in Canada, then it may be due to at least one of the following: targeted marketing or advertising to individuals or entities that are in Canada; managing the “.ca” domain name, or having the company listed in the Canadian Business Directory.
- If your company provides services to customers in Canada, this is determined by the following criteria: residential address; documents issued by the Canadian government; bank cards issued by a Canadian bank; the customer is temporarily living, working, studying, or vacationing in Canada.
Who is not an MSB or FMSB?
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1
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.
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2
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.
Difference between FMSB and MSB licenses in Canada
| Characteristics | MSB | FMSB |
|---|---|---|
| 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 |
The cost of services for obtaining an MSB license in Canada
With registering a company in Canada and corporate bank account opening
- Dedicated consultant with the fully provided individual approach
- Full turnkey company formation assistance
- Company name of your choice
- Individual AML/KYC Policy
- Registration of the activities within FINTRAC
- Corporate documents
- Corporate account
- Handling the communication with Financial Transactions and Reports Analysis Center (FINTRAC)
- *Local Anti-Money Laundering officer
- *Local Director
- *Local Office
With registering a company in Canada
- Dedicated consultant with the fully provided individual approach
- Full turnkey company formation assistance
- Company name of your choice
- Individual AML/KYC Policy
- Registration of the activities within FINTRAC
- Corporate documents
- Handling the communication with Financial Transactions and Reports Analysis Center (FINTRAC)
- *Local Anti-Money Laundering officer
- *Local Director
- *Local Office
Getting the MSB license on the already operating company in foreign country
- Dedicated consultant with the fully provided individual approach
- Registration of the activities within FINTRAC
- Individual AML/KYC Policy
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.Requirements for obtaining an MSB license in Canada
- Need to open a physical office in Canada.
- The company must be registered with FinTRAC.
- Compilation and adherence to AML/CTF policies, risk control, and monitoring rules.
- The company must comply with client identification, record keeping, and reporting rules.
- All founders, shareholders, and employees must be in good standing. Companies need to provide the regulator with certificates of non criminal record in the country of citizenship.
- Companies must have a compliance officer responsible for developing and complying with AML/CTF.
- Entrepreneurs must monitor suspicious transactions and report information to government agencies.
- At least one director with economic experience must be appointed to the company.
Procedure for obtaining an MSB license in Canada
COLLECTION OF DOCUMENTS FROM THE CLIENT TO START THE PROCESS
Stage 1
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.
- Preliminary project analysis;
- KYC collection and business description;
- AML/CTF policy preparation.
REGISTERING A BUSINESS IN CANADA
Stage 2
Result: The company is registered under the approved name; the legal address is registered.
- Choose a name for the company;
- Rent an office and sign an agreement;
- Determine share capital;
- Prepare a set of corporate documents certified by a notary;
- Appoint employees with financial expertise.
OPENING A BANK ACCOUNT
Stage 3
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.
- Preparation of notarized documents;
- Preliminary talks with the payment institution and the account opening process;
- Payment of share capital.
PRE-APPLICATION WORK AND REGISTRATION
Stage 4
Result: Submitting documents for an MSB license. A functioning company in the legal framework of Canada
- Preparing and adapting documents for AML/CTF cryptocurrency company operations;
- Search, employment, training, and adaptation of employees;
- Submission of license application;
- Collecting additional documentation as requested by the FinTRAC representative;
- Negotiating with FinTRAC representative;
- Compliance with FinTRAC representative requirements.
REGISTRATION PROCESS (UNLESS A CLARIFICATION REQUEST WAS SENT TO THE APPLICANT FOLLOWING THE SUBMISSION)
Stage 5
Result: Obtaining an MSB license and the appearance of the company in the registry of licenses
- Submitting the documents to FINTRAC;
- Leading the Client and conducting negotiations with the regulator and full support; during the entire process until the registration is accomplished.
Legislation and Regulation applicable to MSB and FMSB in Canada
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.
Key responsibilities of companies that have an MSB license in Canada
Companies with an MSB license in Canada have the following responsibilities:
- Collecting and storing information about customers who use the company’s services. You need to verify the client additionally if he makes a transaction of $10000 or more.
- If the client is a politically exposed person (PEP), the company is required to find out the origin of the funds and make sure that the funds are not obtained by criminal means and that the process of receiving/transfer does not violate the Proceeds of Crime and Terrorist Financing Act.
- Companies are required to properly maintain and retain financial records and retain them for five years after additional customer verification transactions.
- To obtain an MSB license in Canada, companies must familiarize themselves with the financial market and the regulatory framework that governs this activity
Penalties for non-compliance
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.
FAQ about Canada MSB license
What is an MSB in Canada?
An MSB is an entity that is not part of the banking system but can perform certain types of financial transactions within the country such as money transfer services, digital currency trading, payment systems, financial agents, currency dealers, etc. MSBs in Canada are supervised under the Anti-Money Laundering and Counter-Terrorist Financing Act.
How do I get an MSB license in Canada?
To get an MSB license in Canada, you must apply to the Financial Intelligence Unit of Canada (FINTRAC) and apply for an MSB license. The application should contain detailed information about the company and its operations, including a description of the business model, the existence of a local office, management identification, bank account information, etc. Once the application is submitted, FINTRAC will analyze and decide whether to grant or deny the license.
How long does it take to get an MSB?
It can take anywhere from a few weeks to several months from company registration to licensing. If all documents are prepared in full, it can take about 3 weeks to review the FINTRAC licensing package. However, if additional documents are required during the review process, it may take longer.
What is an example of an MSB?
Western Union and MoneyGram are good examples of MSB. They provide money transfer services and allow you to send and receive money anywhere in the world. In general, an example of an MSB would be any company that provides electronic payment, credit, currency conversion, remittance sales, and other types of financial transactions. Such companies can be either large financial institutions or small start-ups.
Who regulates MSBs in Canada?
MSBs in Canada are regulated by the Financial Transactions and Reports Analysis and Analysis Centre (FINTRAC), which monitors and collects information on financial transactions to combat money laundering and terrorist financing. FINTRAC also sets the rules and standards that MSBs in Canada must meet and issue licenses to conduct financial activities.
Who is not an MSB or FMSB?
You are also not an MSB or FMSB if you act solely as an agent providing one or more MSB services or provide other services in MSB activities, such as acting as a securities dealer. Also, not all financial institutions qualify as MSBs or FMSBs. For example, banks and investment companies usually do not fall into these categories because they have different forms of regulation and licensing.
What can you do with an MSB license in Canada?
An MSB license in Canada allows companies to provide services related to electronic payments, including money transfers, currency exchange, issuance and sale of remittances, etc. With this license, companies are allowed to conduct transactions in Canadian dollars or foreign currency, both within Canada and in other countries. In addition, MSB companies can work with individuals and legal entities, including international companies, which opens up opportunities for expanding business and increasing the customer base.
What are the AML risks for MSBs?
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.
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