In Canada, operating as a Money Services Business (MSB) requires a specific license issued by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). An MSB license is mandatory for businesses engaged in activities such as currency exchange, money transfers, virtual currency transactions, or dealing with foreign remittances.
What is an MSB License?
A Money Services Business (MSB) license allows a company to legally offer services like:
- Foreign currency exchange
- Money transfer services
- Issuing or redeeming money orders
- Dealing in virtual currencies (e.g., Bitcoin, stablecoins)
The MSB registration ensures businesses comply with Canadian regulations to prevent money laundering and terrorist financing. FINTRAC acts as the primary regulatory body that monitors MSB operations to detect and report suspicious financial activities.
Who Needs an MSB License?
You need an MSB license if your business operates any of the following services within Canada:
- Foreign exchange services: Buying or selling currencies.
- Money transfer services: Sending or receiving funds on behalf of clients (including international remittances).
- Virtual currency services: Facilitating cryptocurrency transactions.
- Payment services: acquiring, issuing prepaid cards, or providing stored value products.
If you plan to offer any of the above services, it is legally mandatory to obtain an MSB license, whether as a sole proprietor or a corporation.
Process of Getting an MSB License in Canada
Follow these steps to register your MSB and obtain the license:
### Step 1: Incorporate In Canada
Before applying for the MSB license, you need to register and incorporate your business in Canada. This process includes choosing a business structure (corporation, sole proprietorship, or partnership) and registering with your province or territory.
### Step 2: Create a Compliance Program
FINTRAC requires all MSBs to implement an AML and CTF compliance program. This program must include:
- Appointment of a compliance officer.
- Written internal policies and procedures to detect and report suspicious activities.
- Regular training programs for staff.
- Risk assessment procedures to identify potential threats and suspicious transactions.
### Step 3: Register with FINTRAC
To obtain your MSB license, you must register with FINTRAC. Here’s how:
1. Visit the FINTRAC registration portal.
2. Complete the online registration form with details about your business.
3. Provide key information, including:
- Business name and address
- List of services you intend to offer
- Information about the compliance officer
- Description of AML/CTF policies
You will receive a confirmation email once your registration is approved.
### Step 4: Pay the Required Fees
There is no fee for registering as an MSB with FINTRAC. However, you may need to pay other costs for maintaining AML/CTF compliance, such as software tools, external auditors, and training programs.
If you still feel that you might benefit from external help in applying for your MSB license, fill out our contact form and we will connect you with appropriate lawyers or consultants that specialise in helping with MSB licensing.
Compliance Requirements for MSBs
Once your business is registered as an MSB, it is essential to comply with Canadian laws to avoid penalties:
1. Record-Keeping
- Maintain detailed records of transactions, especially those over CAD 10,000.
- Ensure customer identification and verification (KYC procedures).
2. Reporting to FINTRAC
MSBs must report specific financial activities to FINTRAC:
- Large cash transactions: Transactions exceeding CAD 10,000.
- Electronic funds transfers: Transfers of CAD 10,000 or more across borders.
- Suspicious transactions: Any activities that raise money laundering concerns.
- Terrorist property reports: If you suspect that property or funds are linked to terrorism.
3. Annual Compliance Review
MSBs must conduct an annual review of their compliance programs. This helps identify and address any gaps or weaknesses. External audits may be required depending on the size and complexity of the business.
4. Training for Employees
All staff involved in MSB operations must undergo regular AML/CTF training to stay updated on compliance policies and regulatory changes.
Renewing and Maintaining Your MSB License
MSB licenses must be renewed annually by updating your registration with FINTRAC. You’ll need to:
- Verify that all business information on record is accurate and up-to-date.
- Confirm that your compliance program meets regulatory standards.
- Submit any additional documentation if requested by FINTRAC.
Opening Bank Accounts For Your Canadian MSB
Your newly set-up MSB will need operational, client money and safeguarding accounts to become fully operational. We have discussed account opening process and other particularities extensively in this article.
Conclusion
Obtaining an MSB license in Canada is essential for businesses offering money services, ensuring they operate legally and transparently. The process involves incorporating your business, developing an AML/CTF compliance program, and registering with FINTRAC.