The Canadian financial sector maintains strong regulations that work to stop both money laundering operations and terrorist financing activities. All businesses offering money services including currency exchange or crypto-asset dealing must acquire registration from FINTRAC as a money service business which stands as a mandatory legal requirement. The following guide explains each step of the process along with key details that are commonly missed.
I. Who Needs to Register as a Canadian MSB? Defining the Scope
Before even considering the application, you must confirm if your business falls under FINTRAC’s definition of a Money Service Business. This is the foundational step. A business requires an MSB license Canada if it provides any of the following services to the public, on a commercial basis:
- Foreign Exchange Dealing: This includes buying or selling foreign currencies.
- Money Transferring: The act of transferring funds from one person or entity to another, domestically or internationally. This applies to both fiat and virtual currency transfers.
- Issuing or Redeeming Money Orders: This includes traveler’s cheques or other similar negotiable instruments.
- Dealing in Virtual Currency: This is a broad category that includes:
- Exchanging virtual currency for fiat currency or another virtual currency.
- Transferring virtual currency on behalf of a client.
- Operating a virtual currency exchange platform.
It is important to note that if your business is based outside of Canada but offers any of these services to individuals or entities within Canada, you must register as a Foreign MSB (FMSB).
II. The FINTRAC Registration Process: A Detailed Roadmap
The FINTRAC registration is a multi-stage process that demands meticulous attention to detail. Skipping a step or providing incomplete information will inevitably lead to significant delays.
Phase 1: Pre-Registration and Initial Engagement
This is the very first formal step. You begin by completing a pre-registration form on the FINTRAC website. This form is concise and primarily serves to alert FINTRAC of your intent to register.
- What you provide: Basic information about your company (legal name, address, contact details), the type of money services you plan to offer, and an initial estimate of your transaction volumes.
- The FINTRAC response: A FINTRAC compliance officer will review your pre-registration and, if everything is in order, will contact you to provide access to the full, more detailed registration form. They will also provide a secure Canada Post Connect message channel for subsequent communication and document submission.
Phase 2: The Comprehensive Registration Submission
The application phase represents the most vital stage which requires significant work from applicants. To demonstrate your business compliance and low-risk status you need to assemble an extensive set of documents along with detailed information. The process will advance more quickly when you submit a submission that contains complete and precise information.
Business Information:
- Full legal name and any operating names.
- Proof of business incorporation or registration.
- All physical addresses of your business and any agents.
- Bank account information to be used for MSB activities.
- Detailed business plan outlining your services, target market, and operational structure.
Ownership and Management Details:
- Names, dates of birth, addresses, and copies of government-issued IDs for all owners, directors, and senior management.
- A significant detail for FMSBs: Certified criminal background checks for key executives are often required.
- Disclosure of all beneficial owners (anyone who owns 20% or more of the company).
The Compliance Program: Your Most Important Document
- This is the cornerstone of your application. Your compliance program demonstrates how you will fulfill your obligations under the PCMLTFA. It must be in writing and tailored specifically to your business. It must include:
- A Risk Assessment: Your business needs a comprehensive evaluation which examines all money laundering and terrorist financing threats present in your operations and client base and services and operational locations.
- Compliance Policies and Procedures: Your organization needs defined guidelines for workers that outline procedures for client verification and documentation maintenance and mandatory reporting practices. Training Program: Your organization needs to develop a systematic approach for delivering regular training sessions about the compliance program to all employees.
- Compliance Officer Appointment: Your business must issue a formal letter which establishes a designated compliance officer (CAMLO) to lead the program.
- Ongoing Review: A plan for an independent review of the compliance program every two years.
- This is the cornerstone of your application. Your compliance program demonstrates how you will fulfill your obligations under the PCMLTFA. It must be in writing and tailored specifically to your business. It must include:
Phase 3: The FINTRAC Review and Approval
Once your application is submitted, FINTRAC will conduct a thorough review. This is where patience is key.
- Clarification Requests: It is extremely common for FINTRAC to request additional information or clarification on your submission. Your timely and precise response to these requests is crucial for avoiding further delays.
- Approval: If FINTRAC is satisfied with your application, they will approve your registration and add your business to their public registry of MSBs. You will receive a unique MSB registration number.
III. Post-Registration Obligations: The Journey Has Just Begun
Being a registered money service business is not a one-time achievement. Maintaining your compliance is an ongoing legal obligation. Failure to do so can result in severe penalties, including administrative monetary penalties, public naming, and even criminal charges.
Your key ongoing obligations as an MSB include:
- Reporting to FINTRAC:
- Suspicious Transaction Reports (STRs): The most important report. You need to submit a report whenever you have reasonable grounds to suspect a transaction or attempted transaction is connected to money laundering or terrorist financing offenses.
- Large Cash Transaction Reports (LCTRs): Reporting cash transactions of C$10,000 or more. Electronic Funds Transfer Reports (EFTRs): Reporting international electronic funds transfers of C$10,000 or more.
- Large Virtual Currency Transaction Reports (LVCTRs): Reporting virtual currency transactions of C$10,000 or more.
- Record-Keeping: Maintaining detailed records of transactions and client identification for at least five years.
- Client Identification (Know Your Customer – KYC): You need to verify client identities during specific transactions and create client risk assessments.
- Ongoing Monitoring: You should monitor client activity continuously to identify suspicious behavior.
- Program Updates: The compliance program of your organization needs periodic updates to stay in sync with changes in your business operations and FINTRAC regulations.
- Biennial Review: An independent review of your compliance program every two years to ensure its effectiveness.
Following this detailed guide alongside your continuous responsibilities will help you manage the Canadian MSB license process while maintaining an authorized and secure money service business.
