Canadian MSB and RPAA License

NOTE: Please contact us at info@kcmaccounting.com to confirm your eligibility before placing an order. If you place an order before confirming your eligibility and are found to be ineligible, you will be issued a refund minus any transaction costs incurred.

What is a Canadian MSB License?

In Canada, an MSB (Money Services Business) license is required for businesses that engage in certain financial activities. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is the regulatory body responsible for overseeing and regulating MSBs in the country.

Which types of businesses require an MSB License?

An MSB license is necessary for businesses that provide services such as:

1. Foreign Exchange (Forex) Services:
   • Businesses that deal with the exchange of currencies, including currency exchange offices.
2. Remittance Services:
   • Businesses that facilitate the transfer of money domestically or internationally on behalf of clients.
3. Dealing in Virtual Currencies:
   • Since June 2020, businesses dealing in virtual currencies are also considered MSBs and are required to register with FINTRAC.
4. Cheque Cashing Services:
   • Businesses that provide cheque cashing services.
5. Issuing or redeeming money orders, traveller’s cheques, or electronic money:
   • Entities that issue or redeem these financial instruments.
6. Payment Service Providers (PSPs):
   • Companies that process electronic payments between consumers, merchants, and financial institutions.

Why do you need an MSB License in Canada?

The purpose of requiring an MSB license is to combat money laundering, terrorist financing, and other financial crimes by ensuring that businesses engaged in financial transactions are subject to regulatory oversight.

What is the process to obtain and keep an MSB License?

To obtain an MSB license in Canada, businesses must:

1. Register with FINTRAC:
   • MSBs must register with FINTRAC and provide information about their ownership, structure, and the nature of their business.
2. Implement a Compliance Program:
   • MSBs are required to develop and implement a comprehensive compliance program to ensure compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations.
3. Report Large Transactions:
   • MSBs must report large cash transactions and certain electronic fund transfers to FINTRAC.
4. Keep Records:
   • Maintain records of transactions and customer identification for a specified period.
5. Submit Reports to FINTRAC:
   • Submit various reports to FINTRAC as required by regulations.

What is RPAA?

The Retail Payments Activities Act (RPAA), introduced in 2021, regulates retail payment systems in Canada, including digital wallets and online payment services.

It gives the Bank of Canada authority to oversee payment service providers, ensuring security, transparency, and operational standards.

Under the RPAA, payment service providers must register with the Bank of Canada. The registration requirement came into effect on November 1, 2024 for existing providers, while new providers must register before they begin operations.

The act aims to enhance consumer protection, maintain payment system stability, and reduce risks like fraud by ensuring payment providers disclose fees, resolve disputes, and provide secure services.

What types of MSBs need to register under RPAA?

The types of MSBs that must register under the RPAA include:

1. Payment Processors: Companies that process retail payments, including online or mobile payment systems.
2. Digital Wallet Providers: Businesses that offer digital wallets or similar services that store and transfer funds on behalf of consumers.
3. E-money Issuers: Entities that issue electronic money (e-money) for the purpose of facilitating payments.
4. Fund Transfer Operators: MSBs facilitating money transfers, including cross-border payments and remittances, where the payments are considered retail payments.

It’s essential for businesses engaging in the activities mentioned above to be aware of and comply with the regulatory requirements outlined by FINTRAC. Failure to obtain the necessary MSB license or comply with AML/CTF regulations can result in penalties and legal consequences.

Please note that regulations may change, and it’s advisable to check with FINTRAC or legal professionals for the most up-to-date information regarding MSB licensing requirements in Canada.