Canada MSB License (Money Services Business)
Tetra Consultants assists our international clients in securing a Canada MSB License (Money Services Business). Amended in December 2001, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) has come into effect to deter financial crimes within the land of Canada.
With the aim of enhancing the regulatory framework for money services businesses, the act also serves to combat transnational crimes, particularly in money laundering and terrorist activities.
Introduction to Canada MSB License
- Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, your business is required to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). As of 1st June 2020, foreign money services businesses are also required to register with FINTRAC and thereby, comply with their reporting and record-keeping requirements.
- Non-compliance with the Act may result in criminal or administrative penalties. Generally, non-compliance will be followed with an assessment by FINTRAC to determine a suitable response. Administrative monetary penalties are commonly used to address repeated non-compliant behavior, and facilitate future compliance with the Act.
- In extreme cases where non-compliance to the Act is extensive or otherwise deemed to be impossible, criminal penalties may ensue. Criminal penalties such as a fine or imprisonment can be issued under these cases.
When will you require a Canada MSB License?
Under the Act, a person must have in force a Canada MSB License (Money Services Business) to be entitled to carry on a business of –
#1: Providing one of the following services:
- foreign exchange dealing;
- money transferring;
- issuing or redeeming money orders, traveller’s cheques or anything similar; and
- dealing in virtual currency
#2: Providing direct services at persons or entities in Canada
- This will apply if you are directing your promotional materials to persons or entities located in Canada, operating a Canadian domain name or otherwise, have your business listed in any Canadian business directories such as Akama, Strictly Canadian, LiveBusiness and more.
- Otherwise, offering money transfer services, performing foreign exchange transactions for single transfers amounting to more than $1,000 with the same individual or entity can also be considered as a direct service.
#3: Providing these services to clients located in Canada
- The Act will also be applicable to your foreign business if you are providing services to clients whose address is in Canada, possess banking, credit card or payment processing service in Canada or identity is issued by a Canadian province or territory.
- It is also important to note that you will not be subjected to this Act if you are operating strictly as an agent for a money services business or acting as a reporting entity performing money services business activities while also running other related services.
- If you are unsure whether your Money Services Business requires the Canada MSB License, feel free to contact us for a non-obligatory consultation. Our team of experts will revert within the next 24 hours.
Mandatory requirements for Canada MSB License
MSB Registration with FINTRAC
- Typically, all businesses – foreign or local operating in the field of money services will be required to register with FINTRAC.
- Generally, if you are found guilty or involved in any money laundering offences or offences listed under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, Controlled Drugs and Substances Act or the Criminal Code, you will not be eligible.
- Alternatively, corporations, partnerships and other forms of entities with owners with share ownership of 20% or more are also not eligible.
- There are no registration fees imposed by FINTRAC.
- The registration process will require various KYC documents such as incorporation information, personal details about your business’ owners and senior management, number of employees, bank account information and more.
- For foreign businesses, a police record check will be instituted. You will also require to submit the name and address of a Canadian representative. The representative will be mainly in-charge of receiving notices and documents on behalf of your company and liaising with government authority.
- Upon completing the registration process, you should receive an approval notice and your registration number.
- A FINTRAC examination will be conducted by the relevant authority to review if your business is following the required documentation processes and whether relevant employees or agents are trained sufficiently to maintain and upkeep with all reporting obligations.
- All Canada MSB License (Money Services Business) applicants will have to appoint a compliance officer who is mainly responsible to implement and review the program, plan and execute compliance policies, review mitigation measures and strategies as well as prepare a developmental program to ensure that all employees and agents involved in your money services business are trained sufficiently.
- Typically, the compliance officer can be yourself or another individual. For best practice, Tetra Consultants advises you to appoint a person who is not involved in the receipt, transfer or payment of funds. This would ensure that there is an active check-and-balance system in place.
- To ensure efficiency, a compliance officer is permitted to delegate duties to other employees. However, all responsibility for the implementation of the compliance program will fall onto the compliance officer.
- It is expected that the compliance officer appointed have the necessary knowledge and expertise in your business’ functions and structures, understand the risks and vulnerabilities as well as have the necessary capabilities to implement an effective program. The compliance officer should also be given the ability to report compliance-related issues to the board on a regular basis.
- The compliance officer appointed will also be responsible for reviewing the program biennially.
- Generally, the policies adopted should be comprehensive in managing your risk assessment activities, the measures undertaken, the ongoing compliance training program and a review about the effectiveness of the program.
- Other relevant details to include are KYC documents and transaction reports. It is also important that ministerial directives and transaction restrictions are documented. The level of detailedness will be dependent and varied according to the size, structure and complexity of your business.
- All compliance policies and procedures should be written in a form that permits access to all its intended audience. The policies and procedures should also be continuously updated to ensure relevancy. Any new policy planned should also be approved by a senior officer.
- When documenting your risk assessment, you can consider evaluating the mitigation measures undertaken. As for new products, it is expected that you consider and document any risks associated with it while collectively plan strategies to alleviate these risks.
- The development of an ongoing compliance training program should be done in writing, constantly reviewed and updated. For sole proprietorships, you are not required to have a training program but instead, you should be able to substantiate the availability of all other required factors needed to substitute a compliance program.
- The training program should be made available to front line staff or agents, employees involved in client transaction activities, handling cash or funds or senior managers and internal auditors overseeing the compliance program.
- A simple guideline for your training program would be to include comprehensive background information on money laundering and how the process works, the available compliance policies and procedures to prevent and detect such cases and the due responsibility of each employee. It should also be tailored to the nature of your business so that your employees and staffs will be able to correlate and recognize suspicious transactions.
- The biennial review can be conducted by an internal or external auditor who has sufficient knowledge of the Act and its associated regulations.
Verification of Clients’ Identity
- In every Canada money services business, understanding and knowing your client is fundamental.
- Subjected to the Act and its associated regulations, all money services businesses are mandated to verify their clients’ identity.
- Typically, the verification process would entail reviewing its name and address as well as the names of the corporation’s directors.
- This identification process is applicable when performing services such as,
- issuing or redeeming negotiable instruments of $3,000 or more;
- remittances or transmissions of $1,000 or more;
- foreign currency exchange of $3,000 or more;
- large cash transactions;
- suspicious transactions; and
- client information records
- Canada MSB License (Money Services Business) holders are mandated under the Act to complete and file transactions and property reports.
- Should there be a reasonable amount of evidence to doubt the authenticity of a particular transaction, you have to submit a Suspicious Transaction Report as soon as possible.
- Otherwise, for big sums amounting to $10,000 CAD or more internationally, a report must be submitted within 5 business days.
- Typically, all Canadia MSB license (Money Services Business) holders will have to maintain and safe keep records of suspicious transactions, large cash transactions, transactions of $3,000 or more, foreign currency exchange, ongoing service agreements.
- These records should be available for inspection by FINTRAC within 30 days upon request.
Timeline to secure Canada MSB License
- Generally, you can expect your Canada MSB license (Money Services Business) application to take minimally 1 month. Each application will be reviewed individually, and they may revert asking for additional supporting documents or information.
- For example, a clarification request may be reverted if the information previously provided is missing, incomplete, or inconsistent. Upon receiving a clarification request, you will have 30 days to make the necessary amendments or to verify the information submitted previously.
How to obtain MSB license in Canada?
- Tetra Consultants will assist you in registering a Canadian company by providing a local company address, local nominee director and local company secretary. Typically, this process should take approximately 2 weeks.
- Upon registering the company, we will proceed to open a corporate bank account with a reputable local or international bank. You can expect your corporate bank account to be ready in 4 weeks.
- Concurrently, our dedicated team of consultants will assist you in registering with FINTRAC through its online portal. Typically, this will require going through a pre-registration process submitting various KYC documents such as your business number, email address, and more.
- Following, we will submit your registration form detailing your bank account information, information about your compliance officer, number of employees, incorporation information, and more. For foreign businesses, you can expect a police check record. Should the police check record require translation, we will review and translate the document into English for your perusal.
- FINTRAC requires that every company provides the name and address of a Canadian representative. If so required, we will appoint a fit and proper representative to receive notices and documents on your behalf.
- Afterward, our team of consultants will assist you in preparing a comprehensive business plan as well as plan a compliance program. The business plan and compliance program will be drafted in writing for your further review and in accordance with the Act and associated regulations imposed by FINTRAC.
- As all companies require a compliance officer, Tetra Consultants will also assist in recruiting a fit and proper compliance officer. The compliance officer will also be equipped with the necessary knowledge about the Act and its associated regulations to ensure that your business remains compliant.
- Developing and applying written compliance policies is fundamental in upkeeping the license. Our team will review the adopted compliance policy and advise you on how you can more effectively update and improve the compliance program. We will also assist you with the drafting of an effectiveness review of the compliance program.
- Prior to a FINTRAC examination, Tetra Consultants will also advise you on how you can update the required documentation or improve on the existing compliance program. This is to ensure that your business remains capable of addressing all money laundering or financial crime threats.
Contact us to find out more about how to secure Canada MSB License to conduct Money Services Businesses. Our team of experts will revert within the next 24 hours.
How do you report to FINTRAC?
- Reporting entities can send their reports electronically to FINTRAC provided if you own the technical capabilities to do so. However, terrorist property report or where technical capabilities are not met for the other reports can be submitted in written.
What are the deadlines for the various reports?
- The deadlines differ from reports to reports. For electronic funds transfer reports, they should be sent no later than 5 working days to FINTRAC. For suspicious transaction reports, they should be sent no later than 30 calendar days from where it can be determined with reasonable suspicion that the attempted transaction is possibly part of a financial crime. As for large cash transaction and casino disbursement reports, they should be submitted no later than 15 calendar days.
What will happen to the reports I submit?
- The reports submitted will be carefully analyzed by FINTRAC to evaluate whether there are any possible threats of financial crimes. Each report is retained for 10 years by FINTRAC.
Will any fees be charged during reporting?
- FINTRAC does not charge any fees – be it during registration, or further to file a report.
Is reporting incomplete suspicious financial transaction necessary?
- Yes, you must still report an attempted transaction if you have sufficient evidence to back up or suspect that it is a possible case of financial crime.
Must I report any terrorist property to other authorities?
- Yes, under the Criminal Code, you are mandated to relay any of such information or transaction to the RCMP, Anti-Terrorist Financing Team and CSIS Financing Unit.
Does FINTRAC freeze funds?
- No, FINTRAC does not freeze or seize any funds.
Will the privacy of my clients be protected?
- The Privacy Act strictly regulates how FINTRAC can use and disclose information collected during reporting. This means that the personal information collected from you will be protected from any unauthorized disclosure and can only be disclosed where there are reasonable grounds to suspect that the transaction is possibly linked to a financial crime.
What are the penalties involved?
- Mainly, an administrative monetary penalty will be issued for any non-compliance cases. However, it is to note that the penalty is not the first solution to non-compliance. Rather, FINTRAC will work together with you to correct the non-compliant behavior before considering to charge any penalty.
What is the difference between a civil and criminal penalty charged?
- Under the PCMLTFA, both penalties apply but are meant for differing purposes. A criminal penalty is mainly adopted to punish any wrongdoing and will include fines, imprisonment or both. While an administrative monetary penalty is used strictly against compliance violations. It will involve an incentive to take up corrective actions. FINTRAC will not be able to concurrently pursue both punishments.