CanadaA Step-by-Step Guide to Obtaining a Money Services Business License in Canada

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  • The Canadian fintech landscape, which includes the thriving centers of Toronto, Montreal, Calgary, and Vancouver, is still blowing up following a robust in 2021, which saw the country’s highest-ever levels of fintech investment. Canada’s importance in the global fintech ecosystem is growing, with 2021 placed to be a milestone year for fintech investment in the country. Canada has around 1,200 fintech enterprises, with Toronto serving as the country’s commercial center. The region’s second-biggest financial hub and the greatest concentration of financial services jobs in North America promote the region’s innovation environment. Canada is also home to some of the world’s major banks, insurance companies, and asset managers. Furthermore, Toronto is North America’s fastest-growing tech market, with over 80,000 tech jobs added in the last five years. Toronto currently has the third biggest concentration of technology talent in North America, accounting for 10.2 percent of total employment.
  • If you too are looking to jumpstart your entrepreneurial journey and it has to do with fintech, taxes, property rights, and bureaucracy then Canada is the right place for you. Your company can provide financial services in Canada, but only after you secure a payment license. In this case, it is the money service business license of Canada we are going to talk about. 
  • Tetra Consultants is an international business consulting firm. We provide assistance with securing a Canada MSB license. Our comprehensive service package includes Canada company registration, corporate bank account opening, fulfilling accounting and tax obligations, and ultimately providing continuous support with the preparation, and submission of a Canada MSB license (Money Services Business). In this article today, our team has provided a step-by-step guide on how to obtain a Money service business license in Canada. 

What is a money services business (MSB)? 

  • An MSB is a type of financial institution which actively engages in various financial activities such as check cashing services, currency exchange services, virtual currency transaction services, issuance and redemption of checks, money orders and bank chargers of foreign individuals, money transfer services, ATM operations, etc. However, an MSB does not encompass banks, another type of financial institution which need not obtain such licenses. This leads nicely to the next segment of this article, explaining the different entities that are required to obtain the Canada MSB License, and the types of metrics they are judged on. 

Who is required to obtain the Canada MSB License?

As alluded to earlier, businesses engaging in the provision of financial services to their consumers are obligated to obtain the Canadian MSB License. These financial services include financial activities:

  1. Currency exchange: Conducting transactions in which you exchange one type of currency for another (for example, exchanging USD to EUR the Canadian dollar).
  2. Money transferring: Transferring money from one person or legal entity to another using an electronic money transfer network or any other mechanism. Transfer cash and carry out cross-border transactions for both individuals and corporations. Additionally, issuing and redeeming negotiable instruments like money orders, traveler’s checks, and others.
  3. Account issuance: Offering personalized e-wallets that allow your clients to keep monies or deposit them straight into a bank account linked to their e-wallet.
  4. Merchant acquiring: Enabling clients to accept card payments via a POS terminal or an online payment gateway page.
  5. Trading in virtual currency: Dealing with virtual currencies and offering virtual currency exchange and virtual currency transfer services. 

Wherein, the virtual currency exchange services include the exchange of:

  • Cash funds for virtual currency;
  • Virtual currency for cash funds;
  • Virtual currency for another virtual currency.

And, the services for transferring virtual currency as a payment instrument include: 

  • Virtual currency transfer (sending) at the client’s request;
  • Receipt of the virtual currency transfer for transferring to the recipient.

It is to be considered that according to the regulation passed in Canada in early June 2020 has expanded the definitions of virtual currency to allow for cryptocurrency to be used and exchanged, allowing payment operators to run platforms with cryptocurrency exchanges. Now that you have a much clearer understanding of MSB Licenses, as well as which types of business entities would require such licenses, you may be wondering about the process of obtaining a Canada MSB License. 

Steps to obtain a money service business license in Canada

Well, Tetra Consultants will now be providing 5 simple steps you can follow to obtain your Canadian MSB License today. 

Step 1: Company registration and incorporation in Canada 

  • First and foremost, you need to incorporate a Canadian company, and your company must decide on the most basic details like your business name and location. While this may appear insignificant, your distinctive business name will represent how people perceive your organization in the public domain, therefore choosing an acceptable name is critical. Similarly, you must select an appropriate province in Canada to operate in because this will impact your ability to attract the correct customers and even workers. 
  • With regards to your business location, once you have decided on a suitable locality, you must provide a photo of your premises and details about your registered address when obtaining your Canada MSB License. When it comes to the authorized capital, there is no official stipulation about the minimum amount of authorized capital to be put down by the relevant government agencies and regulatory authorities. However, it is strongly recommended to deposit and put up a sizable amount of authorized capital to demonstrate to the government agency your company’s sincerity in its intentions of business planning and development. Last but not least, when it comes to the management aspect of a business, during this registration phase, at least one official resident director should be appointed to run and control the internal affairs of your business.
  • Tetra Consultants team can assist with Canada company registration by providing the local company address, nominee director, and local company secretary. We expect to complete the registration process within 2 weeks. Once the entity is registered, our team will also proceed with the corporate bank account opening with a local or internationally reputable bank which should be completed within 4 weeks depending on the KYC procedure completed by the banking body. 

Step 2: Search and recruitment of an employee responsible for compliance

  • To further comply with the minimum regulatory obligations before you proceed to apply for a Canada MSB license with the Financial Transactions and Report Analysis Centre of Canada (FINTRAC), you need to have qualified personnel who can be positioned and responsible as a Compliance officer for handling the regulatory compliance and additionally has experience in the financial sector. 
  • If engaged, Tetra Consultants will guide you in meeting the above requirements of the local regulator. Our staff will aid in the hiring of qualified personnel from the local region. Tetra Consultants’ Human Resource Team will perform the applicant shortlisting and initial interview. After that, you may narrow down the final list of prospects to assess who is the best fit for the business. Tetra Consultants will assist with the preparation of a contract of employment with the agreed terms once the candidate has been recruited.
  • In addition, you need to have a local registered office in Canada to further illustrate economic substance, our staff will compile a list of physical offices and deliver it to you. We will include crucial information like monthly rental, location, and size so you can determine which one is appropriate for you. Tetra Consultants will prepare a draft of the lease agreement for you and the landlord to sign after the office has been approved.

Step 3: Preparation of AML / CFT, business plan, and other necessary documentation

  • Once the above things are settled, you need to proceed with the preparation of the necessary documents required to be accompanied with the license application. Tetra Consultants’ legal team is proficient in the drafting of Cana MSB license applications and supporting documents. Our team will provide customized prototypes of such documents with the necessary information and clauses incorporated with the modification suggested by the clients. 
  • The documents required to be filed along with the license application include but are not limited to the following:
    • Name of the company that is going to obtain the license;
    • Legal (actual) address of the company;
    • Contact details of the company representative;
    • Description of the services and activities the company plans to provide.
    • Information about the company’s bank account;
    • Information about your Compliance Officer;
    • Registration information (if your business is a corporation);
    • Information about the owners of your MSB and senior management – for example, their name and date of birth (about the company directors and each person who owns or controls 20% or more);
    • Drafts of AML/CFT policies
    • Estimate the expected total amount of transactions per year for each MSB service you provide;

Step 4: Preliminary registration with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) 

  • To begin the process of obtaining approval for an MSB License in Canada, you must submit a variety of business details to FINTRAC. These details include the finalized name of your company, the official physical address of the company’s office and base of operations, the contact details of the relevant representative from your company, as well as a clear depiction of the financial services you intend to provide, and the types of commercial activities you intend to engage in. Once this list of information has been provided, an interview will be conducted between the representative from your company and a representative from FINTRAC before your Canadian MSB License can officially be processed and approved. 
  • After submitting your preliminary registration, you may get an approval notification and your registration number. When there is missing, incomplete, or conflicting information, you may be prompted to explain your registration and give more information about your MSB. FINTRAC may also deny your registration. Your application to FINTRAC may be declined for a variety of reasons, including failure to respond to a clarification request or ineligibility for registration. Individuals or entities may be ineligible to register if they have been convicted of money laundering or a terrorist financing offense, certain offenses under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, any offense under the Controlled Drugs and Substances Act, offenses under the Criminal Code such as involvement with the activities of a terrorist group, possession of property obtained through crime, or involvement with a terrorist group. Furthermore, companies are ineligible if their CEO, president, directors, or owners (controlling 20% or more of the shares) are designated terrorists or have been convicted of certain crimes; in partnerships, these persons include the managing partner or general manager. 

Step 5: Completing your registration with FINTRAC 

  • Once this preliminary registration phase with FINTRAC, the relevant government authority has been completed, and a list of other business details and critical information has to be provided to them as well. This includes information about your corporate banking account, contact details, and other relevant information about your company’s compliance officer, your staff headcount, your business’ registration information (i.e. details of its incorporation and specific type of business structure), relevant information about the leaders of your MSB and members of your firm’s senior management (i.e. individuals who control 20% or more of the firm), projected values of financial transactions every year for every type of financial service you intend to provide (denominated in US dollars), detailed information about your different branches of operations, as well as details about each MSB agent. 
  • Once all of such information has been provided, your company’s Canada MSB License can officially be approved so that you can engage in the provision of your respective financial services. 

Conclusion 

  • Navigating the country of Canada’s complex business climate as a firm intending to provide a range of financial services and in need of a Canada MSB License might be a challenging process – a hassle to say the least. As such, Tetra Consultants hopes that this article has provided you with a much better understanding of the key steps to obtaining and registering for a Canada MSB License so that you can truly decide on whether you should do so yourself. 
  • So, what are you waiting for? Contact us to find out more about the process of starting a business in Canada, and our dedicated and experienced team will respond within the next 24 hours. 
  • Tetra Consultants will not only empower you by helping to navigate the different regulations of Canada but also aid in facilitating the registration of your company there while providing invaluable, nuanced insights into any potential challenges. 

Tetra Consultants

Tetra Consultants is the consulting firm that works as your advisor and trusted partner in your business expansion. We tell our clients what they need to know, instead of what they want to hear. Most importantly, we are known for being a one-stop solution for our valued clients. Contact us now at enquiry@tetraconsultants.com for a non-obligatory free consultation. Our team of experts will be in touch with you within the next 24 hours.

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