Can Foreign Entrepreneurs Obtain a Canada MSB License Without Living in Canada? 

• If you are a remittance business, cryptocurrency exchange or foreign exchange platform looking to accept customers in Canada, you might be wondering if you need to be based in the country to get a Canada MSB License.  

• No, you don’t have to be a Canadian resident or physically located in Canada to register your business and provide legal money services to Canadians.  

• Numerous foreign business owners are able to secure a Canada MSB License  and operate their businesses from overseas. It is not the location of the founder that is important but whether the business offers regulated money services to individuals or businesses in Canada. 

• The term “MSB license” is commonly used in Canada, but it is actually a registration issued by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). 

• All businesses that offer covered money services to Canadians are required to register before they begin offering services, whether they are located in Canada or abroad. 

What is Canadian MSBs and Foreign MSBs 

• A Money Services Business (MSB) is a business that carries on money services business activities in Canada. This includes activities such as foreign exchange dealing, remitting or transferring funds, issuing or redeeming money orders or traveller’s cheques, and dealing in virtual currencies, including crypto-to-fiat and fiat-to-crypto transactions. 

• A business that wishes to operate as a Canadian MSB must generally establish a presence in Canada, typically by incorporating a Canadian legal entity (either federally or provincially incorporated), and register with FINTRAC as an MSB. 

• A Foreign Money Services Business (FMSB) is a business that does not have a place of business in Canada but provides money services to persons or entities in Canada. This is commonly applicable to foreign-based remittance providers, payment service providers, foreign exchange businesses and cryptocurrency platforms that operate from outside Canada but serve Canadian users. 

• A business may be considered to be dealing with persons in Canada if a customer has a Canadian address, uses identification documents issued in Canada, or relies on a Canadian bank, credit card provider or payment processor.  

• Accordingly, foreign entrepreneurs have two potential options when seeking FINTRAC registration: 
  • Incorporate a Canadian company and register as a domestic MSB; or  
  • Use their existing foreign entity and register as an FMSB without establishing a physical presence in Canada.  

• Regardless of the registration category, the business must comply with FINTRAC’s applicable anti-money laundering and anti-terrorist financing (AML/ATF) obligations, including maintaining a compliance program, conducting customer due diligence, keeping required records and submitting regulatory reports where applicable. 

Step-by-step process to obtain FMSB without living in Canada 

Step 1: Confirm whether registration is required  

• The first question you need to ask is whether your business activities need to be registered with FINTRAC and, if so, under which registration category. 

• If you intend to conduct money services business activities in Canada through a Canadian incorporated entity (whether federally or provincially incorporated), you will generally need to register as a Money Services Business (MSB). 

• If you do not intend to incorporate a Canadian company and instead wish to provide money services to customers in Canada through your existing foreign legal entity, you will generally need to register as a Foreign Money Services Business (FMSB), provided your business directs money services at persons or entities in Canada. 

• Accordingly, before proceeding with the registration, you should decide whether you will: 
  • Incorporate a Canadian company and register as a domestic MSB; or  
  • Use your existing foreign entity and register as an FMSB. 

Step 2: Prepare your corporate structure and management information 

• Once you have determined the appropriate registration category, you should prepare the required corporate and management information. 

• For a domestic MSB, you must first incorporate a Canadian company (either federally or provincially) before submitting the FINTRAC registration. 

• For an FMSB, incorporation in Canada is not required. The registration can be completed using your existing foreign legal entity. 

• At the time of registration, FINTRAC asks for information regarding the legal name of the business, jurisdiction of incorporation, registered business address and contact information. Details of ownership, directors and senior management also need to be provided.  

• One of the key aspects at this stage is the appointment of a Compliance Officer. This individual can be outside of Canada but should have a good understanding of the AML and CTF requirements in Canada.  

Step 3: Develop a PCMLTFA-compliant AML program before launch 

• Prior to offering services to Canadian customers, you are required to implement a comprehensive Anti-Money Laundering compliance program that meets the requirements of the PCMLTFA. 

• Your program must include these following components:  
  • There should be provisions for Internal policies and procedures. These policies should include customer identification procedures, continuous monitoring, sanctions screening, transaction monitoring, and record keeping requirements.  
  • A documented risk assessment is required for all registered businesses, and it involves assessing the risks involved in the products, services, customers, delivery methods and geographic location of the business.   
  • Companies are required to have processes in place to identify and verify customers according to Canadian regulations. Depending on the nature of the relationship and transaction, businesses may also need to collect beneficial ownership information and conduct enhanced due diligence measures. 
  • Further, FINTRAC has imposed record-keeping requirements for businesses of five years. 
  • Registered businesses must also meet FINTRAC’s reporting requirements. This can involve submitting Large Virtual Currency Transaction Reports (LVCTRs), Suspicious Transaction Reports (STRs), and Terrorist Property Reports (TPRs), among other services.  

Step 4: Submit your FMSB Registration to FINTRAC 

• Once you have set up the compliance framework, you can register as an FMSB via FINTRAC’s online registration system. 

• The application must contain specific information about the business, such as its legal form, business address, website and the type of services that will be provided.  

• Additionally, FINTRAC requests details about owners, directors and senior management, as well as criminal record checks from the relevant authorities in each person’s country of residence. These documents should be valid for six months from the date of submission.  

• You will also be required to submit details of your appointed AML Compliance Officer, a summary of your AML program and an estimate of the number of transactions that you will process in the year that you are applying for. 

• The foremost need of foreign businesses is to have a Canadian representative to provide services. This person or entity is authorized to receive legal documents for the FMSB and is a point of contact in Canada. 

• There is no government fee for registration, but businesses should allow for legal advice, compliance consulting, incorporation costs (if applicable) and compliance management costs. 

• If FINTRAC has reviewed the business and found it meets all the requirements, it will be registered and appear in the public MSB registry. 

Step 5: Ensure ongoing compliance 

• Obtaining registration is not the end of the compliance process. Businesses have to fulfill their duties during the whole process of their activities. 

• This includes maintaining accurate registration information and reporting any significant changes in ownership, management, contact details or services provided to FINTRAC. 

• It is also important that businesses review and update their AML policies, procedures and risk assessments regularly to ensure that they are aligned with changes in the business and new risks. 

Conclusion 

• Foreign entrepreneurs can register as a Canada MSB without residing in Canada.  International businesses can legally serve Canadian customers from outside of Canada by registering as a Foreign Money Services Business, establishing a compliant AML program and complying with FINTRAC’s continuing requirements. 

• Tetra Consultants can assist foreign entrepreneurs in preparing compliance documents, AML frameworks, and handling regulatory requirements and application submissions throughout the entire registration process.  

• Contact us and our team of experts will revert back in 24 hours.