Canada is a desirable country for money business services because of its high degree of legal protection, global regulatory compliance, and flexible requirements for financial services enterprises. However, financial companies that offer services to the public must abide by Canadian legislation by obtaining an MSB license. Continue reading to learn more.
How Does MSB Work?
MSB refers to money service businesses that primarily provide financial services and handle transactions involving digital assets, money transfers, foreign currency, bank fees, reimbursements, fund transfers, collection, and more.
In Canada, you are required to comply with a mandatory regulation pertaining to the PCMLFTA (Proceeds of Crime, Money Laundering and Terrorist Financing Act) to operate a Money Service Business and provide any of the aforementioned services to the general public. This is where an MSB license comes in.
Who Needs the MSB License?
Companies that offer the following services in Canada need an MSB license:
Money Transfer
This entails the transmission of funds via the electronic money transfer network or similar means between an individual or legal body. The issuance or redemption of traveler’s checks, money orders, or other comparable tradable instruments also applies.
Currency Exchange
This involves exchange operations (such as swapping US dollars for Canadian dollars) that involve changing one form of currency for another. However, keep in mind that purchases made with foreign money are not considered as using that currency.
Virtual Currency Trading
This encompasses services for exchanging and transferring virtual currencies. The services for exchanging virtual currencies involve the exchange of:
- Virtual currency for cash funds
- Virtual currency for other virtual currency
- Virtual currency for cash money.
Services for transferring virtual money as a means of payment include:
- Virtual currency transfer (transmission) at a client’s request
- Receipt of the virtual currency transfer for the recipient.
The process of Obtaining a Canadian MSB License
Registration and Incorporation of a Business
Make sure your company is appropriately registered and if necessary, incorporated in Canada.
Program for Compliance
You must create and carry out a compliance program that complies with FINTRAC’s specifications. This program must include a risk assessment of your company’s operations, the creation of compliance rules and procedures, hiring a compliance officer, and regular compliance training for staff members.
Registration With FINTRAC
Complete an online MSB registration process with FINTRAC. The registration procedure requires comprehensive details about your company, such as ownership, management style, services provided, and the regions in which you will conduct business.
Create Your KYC Procedures
This involves confirming the identity of customers making transactions that exceed predetermined thresholds or appear suspicious.
Reporting and Record Keeping
Provide guidelines for recording all transactions and informing FINTRAC of specific transactions. This covers reports of suspicious transactions, significant cash transactions, and electronic fund transfers.
Compliance With Other Relevant Regulations
You might also be required to abide by additional regulations, such as the Terrorist Financing and Proceeds of Crime (Money Laundering) Act (PCMLTFA) and its implementing regulations in accordance with your company operations.
Frequent Updates
Maintain the accuracy of your FINTRAC registration details. Your registration with FINTRAC needs to be renewed every two years or whenever there are substantial changes to your business information.
A Key Takeaway
It is advisable to employ a legal expert when establishing an Canada MSB license to ensure you fulfill all regulatory criteria.
