Canada MSB License – Starting your own MSB in Canada
Canadian Money Service Businesses (MSBs) are primarily overseen by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). MSBs in Canada engage a range of financial services, such as currency exchange, money transfers, and issuing or redeeming travelers’ cheques, money orders, or similar instruments. These regulations and reporting requirements are designed to prevent money laundering and terrorist financing activities.
Key Regulations & Compliance
1. Registration with FINTRAC
All MSBs must register with FINTRAC and renew their registration every two years. Failure to register can result in significant penalties.
2. Know Your Customer (KYC) Requirements
MSBs are required to implement KYC procedures. This includes verifying the identity of their clients, maintaining records, and understanding the nature of their clients’ business activities.
3. Record Keeping and Verification
MSBs must keep detailed records of transactions, including information about the clients involved. These records must be kept for at least five years and be available upon request from regulatory authorities.
4. Reporting Obligations
MSBs are required to report certain types of transactions to FINTRAC:
Suspicious Transactions: Reports on any transactions that are suspected of being related to money laundering or terrorist financing.
Large Cash Transactions: Reporting cash transactions of CAD 10,000 or more (or equivilient in any other currency).
Electronic Funds Transfers: Reporting international electronic funds transfers of CAD 10,000 or more (or equivilient in any other currency).
Casino Disbursement Reports: For MSBs operating within a casino.
5. Compliance Program Requirements
MSBs must establish and maintain a compliance program. This includes appointing a compliance officer, developing written compliance policies and procedures, conducting risk assessments, and implementing ongoing training programs for employees.
Penalties for Non-Compliance
Non-compliance can lead to severe penalties, including fines and revocation of the MSB registration. In serious cases, criminal charges might be pursued.
Increasingly, MSBs are leveraging technology for compliance, such as automated systems for transaction monitoring and reporting, which help in meeting regulatory requirements more efficiently.
We do not recommend using Canadian Money Service Businesses for the operation of Crypto Exchanges and similar operations. There are various uncertainties with regards to upcoming regulation and interpretations both on provincial and federal levels. Authorities talk about stable coins constituting securities and/or derivatives. Binance, the biggest crypto exchange in the world, recently pulled out of Canada entirely due to the regulatory uncertainties and new measures. Another option? Crypto Friendly Montana. See www.montanamsb.com for more information.
For information about how you can set up your own Canadian MSB, please visit www.canadamsb.com.