What are the requirements for obtaining an MSB license in Canada?

Canada has established a comprehensive regulatory framework for businesses that provide money services. Companies involved in foreign exchange, money transfers, virtual currency activities, cheque cashing, and certain other financial services may be classified as Money Services Businesses (MSBs) and may need to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

It is important to note that FINTRAC does not issue a traditional federal MSB “licence.” Instead, qualifying businesses must register with FINTRAC before beginning operations in Canada. Registration is a legal requirement under Canada’s anti-money laundering and anti-terrorist financing framework.

What Is an MSB in Canada?

A Money Services Business is generally a business that provides one or more regulated money services. Depending on the business model, these services can include:

• Foreign exchange dealing

• Remitting or transmitting funds

• Issuing or redeeming money orders and similar negotiable instruments

• Dealing in virtual currency

• Certain crowdfunding platform services

• Transporting currency or certain negotiable instruments

• Cheque cashing

• Certain private automated banking machine (ATM) acquiring services

Businesses can assess their activities to determine whether they fall within the Canadian MSB regulatory framework.

Key Requirements for MSB Registration in Canada

Businesses considering obtaining an msb license in Canada should prepare for several registration and compliance requirements.

1. Register With FINTRAC Before Operating

An MSB operating in Canada must register with FINTRAC before beginning its operations. Registration may still be required even when the business is also registered or licensed by a province or territory.

FINTRAC does not charge a registration fee. Operating without the required registration can result in administrative monetary penalties or criminal charges.

2. Provide Detailed Business Information

Applicants must submit information about their business and operations. Depending on the structure and activities of the company, this can include:

• Business and incorporation information

• Bank account information

• Compliance officer information

• Number of employees

• Information about owners and senior management

• Expected annual transaction volumes

• Details of business locations

• Information about agents or mandataries operating on the company’s behalf

Applications should be complete and supported by the required documentation.

3. Submit Criminal Record Checks

Criminal record checks are required for certain individuals associated with the business. This can include the CEO, president, directors, and individuals who directly or indirectly own or control 20% or more of the entity or its shares.

The checks generally need to meet FINTRAC’s requirements regarding the issuing authority and date of issuance. Where documents are not in English or French, appropriate translations may also be required.

4. Provide Proof of Corporate Existence and Ownership

Applicants must provide documentation confirming that the business legally exists and showing its ownership and control structure.

For corporations, this may include incorporation documents, information about directors, and documentation identifying shareholders or other persons with ownership or control.

Partnerships and other legal entities may need to provide equivalent organizational and ownership documents.

5. Establish a Compliance Program

Registration is only one part of an MSB’s regulatory obligations. MSBs must establish a compliance program designed to meet Canada’s anti-money laundering and anti-terrorist financing requirements.

A compliance program generally includes:

• Assessing money laundering and terrorist financing risks

• Establishing written compliance policies and procedures

• Appointing a compliance officer

• Providing employee training

• Conducting ongoing monitoring and review

• Maintaining appropriate compliance records

The exact controls required can depend on the size, complexity, activities, and risk profile of the business.

6. Follow Know Your Client Requirements

MSBs must verify customer identities in situations prescribed by Canadian law. The applicable requirements can vary depending on the type and value of a transaction and the services being provided.

Customer identification and due diligence procedures are important components of an MSB’s anti-money laundering compliance program.

7. Maintain Records and Submit Required Reports

MSBs have continuing regulatory obligations after registration. Depending on their activities, businesses may need to:

• Maintain prescribed records

• Verify customer identities

• Monitor transactions

• Identify and assess higher-risk transactions

• Submit applicable reports to FINTRAC

• Keep compliance documentation up to date

These procedures should be established before the business begins providing regulated services.

8. Meet Requirements for Agents and Mandataries

MSBs that operate through agents or mandataries may have additional compliance responsibilities.

Businesses may need to maintain information about their agents, conduct appropriate screening, and establish procedures for monitoring their activities. Certain individuals associated with agents or mandataries may also be subject to criminal record check requirements.

What About Foreign MSBs?

A business located outside Canada may also have Canadian registration obligations.

A foreign money services business that directs and provides certain services to clients in Canada may need to register with FINTRAC before conducting those activities.

Foreign MSBs may need to provide information about their business, owners, senior management, services, locations, and expected transaction volumes. They may also need to designate a representative for service in Canada who resides in Canada and is authorized to receive regulatory notices and communications.

Who May Be Ineligible to Register?

Not every individual or entity is eligible to register as an MSB.

Eligibility restrictions can apply to individuals with certain criminal convictions, listed persons or terrorist groups, and individuals occupying particular ownership or leadership positions.

For corporations, relevant individuals may include the CEO, president, directors, and persons who own or control 20% or more of the shares.

Businesses should review their ownership and management structures carefully before submitting an application.

How Long Does FINTRAC Registration Take?

The processing time for FINTRAC registration can vary depending on the completeness and complexity of the application.

Complete applications are generally processed within approximately three months, although more complicated applications can take longer.

FINTRAC may approve an application, request additional information or clarification, or deny registration where the requirements have not been satisfied.

Is FINTRAC Registration the Same as an MSB Licence?

No. This distinction is important for businesses entering the Canadian financial services market.

FINTRAC registration is a legal regulatory requirement for qualifying MSBs. FINTRAC does not issue a traditional licence or certificate of registration as evidence of approval.

Depending on the services offered, business structure, and location, additional federal, provincial, territorial, or other regulatory requirements may also apply.

Final Thoughts

Starting an MSB in Canada involves more than completing a registration application. Businesses must determine whether their activities fall within the MSB framework, register with FINTRAC when required, provide information about their business and ownership structure, complete applicable criminal record checks, and establish an effective compliance program.

After registration, MSBs must continue meeting their regulatory obligations, including customer identification, recordkeeping, transaction monitoring, reporting, risk assessment, employee training, and oversight of agents where applicable.

Because requirements can vary depending on the business model, services, ownership structure, transaction types, and jurisdictions involved, businesses should carefully review the applicable Canadian regulations and consider obtaining professional regulatory advice before launching their operations.