Comprehensive Guide to Securing an MSB License in Canada

If you plan to venture into the vibrant financial service sectors in Canada then securing a Money Service Business (MSB) license can be your next key step. In Canada, an MSB license is a regulatory requirement to be followed by businesses that provide currency exchange, remittance services, dealing with virtual currencies, issuing or cashing money orders, and other financial services. Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) issue this license.

There are more than 1,000 registered MSBs in Canada that deal with nearly CAD 45 billion in transactions yearly. Hence, the MSB sector is a crucial aspect of the country’s financial landscape. The industry is expected to develop at a 6.2% compound annual growth rate (CAGR) during 2023 to 2028. The factors driving this growth are the rising demand for digital remittance services and international transactions. It can seem challenging to navigate the complex regulatory requirements and maintain compliance obligations for MSB license in Canada. So, the comprehensive guide below discusses all the essential steps a business needs to follow to secure an MSB license in the country.

image 19

Why Should Your Business Obtain an MSB License in Canada?

For businesses dealing with financial services as mentioned above, it is crucial to secure an MSB license in the country. The underlying reasons are outlined below.

  • Operating a business without securing an MSB license is considered illegal. It can lead to penalties and may let the business encounter legal action.
  • With an MSB license, a business can confidently demonstrate that it complies with rigorous regulatory standards. This adherence increases trust among customers and makes the business more credible.
  • Operating with an MSB license makes sure all the business operations are authentic and acknowledged by regulatory authorities. Eventually, this benefits the business in terms of financial growth and partnership.
  • Before obtaining this license, the business needs to maintain Anti-Money Laundering (AML) compliance. Maintaining this compliance helps businesses stay away from financial crimes and also upkeep the reliability of their financial services.
  • Having an MSB license allows the business to legally operate in the country and extend its financial services to a wider market, including cross-border transactions.

Who Qualifies for an MSB License?

Your business requires an MSB license (either as a corporation or as a sole proprietor) if it deals with any of the below services in Canada:

  • Dealing with foreign exchange services i.e. purchasing or selling currencies
  • Supports cryptocurrency transactions
  • Sending/receiving funds, including international remittances, in the name of clients
  • Dealing with issuing, distributing prepaid cards, or offering stored value solutions
kyc 1

Step-by-Step Process of Obtaining a Canadian MSB License

1) Registration for MSB:

i. Check for the license eligibility

First of all, you must determine whether your business is eligible as an MSB in Canada or not. In accordance with Canadian law, those businesses providing money transfer services, currency exchange, or payment processing services are qualified for obtaining the MSB license.

ii. Incorporate your business in Canada

You can proceed for applying for an MSB license in Canada only after registering and incorporating your business in the country. The corresponding process entails selecting a proper business structure and then proceeding with registering with your territory/province. Options you need to consider for your business structure are sole proprietorship, partnership, and corporation.

iii. Registering with the FINTRAC:

In Canada, it is imperative to register MSB with the FINTRAC. The same involves the submission of details of your business like your business activities and ownership information. Here are the steps incorporated for registration with the FINTRAC.

  • Visit the FINTRAC registration portal.
  • In this step, you need to fill up the online registration form with details as applicable. Details you may need to fill in are mentioned here:
  • Your business name and address
  • List of financial services your business envisions provide
  • Information regarding the compliance officer
  • Details of the AML/CTF policies (Note: CTF stands for Counter-Terrorist Financing)
  • Bank account details
  • The number of employees
  • Incorporation information (applicable if your business type is -corporation)
  • Data (name and date of birth) about owners and senior management of your MSB
  • An estimate of the total dollar value of transactions expected yearly for each MSB service your business provides
  • In-depth data about every location where your business will operate
  • Data bout each MSB agent

Note: Once the registration gets approval, you will get a confirmation email.

canada logo 2

iv. Prepare required documentation:

To ensure successful Canadian MSB license registration, your business must submit the required documents. The list includes:

  • Completely filled MSB license registration form
  • Business registration certificate
  • Business plan specifying your offered services and the target audience
  • Proof of ownership

v. Ensuring AML and KYC Compliance:

In the Canadian MSB license process, the (Anti-Money Laundering) and KYC (Know Your Customer) are crucial components. It is imperative for your business to develop and employ a compliance program that fulfils the country’s regulatory standards. These standards include aspects like transaction monitoring, verification of identity, and reporting about suspicious activity. It is necessary to submit information about your AML/KYC compliance program to demonstrate how your business conforms to AML and KYC regulations.

vi. Pay required fees

Note that there is no fee involved in registering an MSB license with FINTRAC. But you may have to pay for other expenses like maintaining CTF/AML compliance which includes fees to be paid for external auditors, software tools, and staff training programs.

2) Adherence to Compliance Requirements Post Licensing for MSB

After getting approval regarding the registration of your business as an MSB, the next step is to adhere to Canadian laws to stay away from penalties. Since financial regulations in the country are stringent, any delays in compliance can even lead to the cancellation of your MSB license. Hence, to avoid such issues, your business can stay compliant by considering the below aspects that help ensure legal operation and business growth as well.

i. Maintain records

Make sure to maintain exhaustive records of transactions, particularly for those transactions that surpass CAD 10,000.  Also, make sure KYC procedures are fulfilled.

ii. Fulfill FINTRAC Reporting requirements

Your business should report some specific financial activities to the FINTRAC under following circumstances:

  • Transactions whose amount exceeds CAD 10,000
  • Electronic funds transfers for transactions of CAD 10,000 or higher that are made internationally
  • Any suspicious activities that lead to money laundering issues
  • If you are dubious that the property or funds are associated with terrorism

iii. Conduct review compliance annually

Conducting a yearly review of compliance programs helps the business detect and address any faults. Your business may need to undergo external audits based on its size and complexity of operations.

iv. Staff training

Regular AML/CTF training is inevitable to be conducted for all personnel involved in MSB operations. The motive behind the same is to keep them abreast of any regulatory changes and compliance policies.

3) Renewal of MSB License

It is vital to renew MSB licenses annually by updating the corresponding registration with FINTRAC.  To ensure hassle-free renewal, you must verify that whatever business information being submitted is up-to-date and accurate. Also, you need to validate that your compliance program adheres to regulatory standards.

4) Bank Account Setup for the MSB

After securing an MSB license in Canada, you must make sure the business is now fully operational, handles transactions smoothly, and safeguards accounts. For the same, your business must set up a bank account.

Conclusion

For any business engaged in money services as discussed in this guide, it is crucial to obtain an MSB license in Canada. Following the appropriate steps, ensuring required compliance, and timely renewal of the license can help a particular business flourish in the competitive financial landscape. You can contact BizDaddy for any queries regarding how to get an MSB license in Canada as it streamlines the MSB license application process and promises hassle-free submissions. Their professionals offer tailored advice so that your MSB license application can adhere to all relevant regulatory requirements. The team also aids your business in document preparations and submitting them.