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MSB Licensing in Canada: A Comprehensive Guide
Canada boasts a stable economy and a thriving fintech sector, attracting businesses with its business-friendly environment. However, to offer financial services, companies must comply with regulations and obtain a Money Services Business (MSB) license.
This guide explains what an MSB is, its different types, the licensing process, and the importance of Anti-Money Laundering (AML) compliance.
What is an MSB?
An MSB is any company, except banks, that provides financial services like:
- Currency exchange (traditional and digital);
- Cross-border transactions;
- Money transfers (card payments, online transfers, etc.);
- Money order issuance and redemption;
- Virtual currency exchange and transfer;
- Issuing personal accounts (digital wallets).
MSB vs. FMSB
Canada also recognizes Foreign Money Services Businesses (FMSBs). While similar to MSBs, FMSBs are located outside Canada but offer services to Canadians. Both types need to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Types of MSBs
Canada recognizes various MSBs, including:
- Currency Exchanges: These businesses convert currencies, both traditional and digital. Examples include Forex, eToro, Gemini, Coinbase, and Robinhood.
- Digital Payment Processors: These act as intermediaries for money transfers, ensuring fast and secure transactions. Examples include PayPal, Stripe, Venmo, and SeaMoney.
- Money Transfer Services: These companies facilitate money transfers between individuals or businesses. Examples include MoneyGram, Western Union, Flywire, and Wise.
- Remittance Processors: These specialize in sending money internationally, often for personal use. Examples include WorldRemit, Remitly, Xoom, and Instarem.
Why is MSB Licensing Important?
Money services can be vulnerable to money laundering. MSB licensing ensures compliance with AML regulations, protecting the financial system. Canada, like many countries, has strict AML requirements for MSBs, including:
- Employee Training: Training staff on identifying and reporting suspicious activity.
- Know Your Customer (KYC): Verifying customer identities.
- Transaction Monitoring: Tracking transactions, especially high-value ones.
- Suspicious Activity Reporting (SAR): Reporting suspected money laundering to authorities.
- Independent Reviews: Conducting periodic reviews of AML compliance procedures.
When Do You Need an MSB License?
You need an MSB license if your business offers any of the listed services in Canada, regardless of your location. This includes:
- Providing services directly to Canadians (individuals or businesses).
- Having a physical presence in Canada (office) or a Canadian website.
- Employing staff in Canada.
How to Obtain an MSB License
Apply to FINTRAC through an online pre-registration form, providing information about your company structure, business model, website address, management, and legal name. FINTRAC will then contact you within five business days.
If pre-approved, you can submit a full registration form with details like bank accounts, compliance procedures, employee numbers, and estimated annual transactions. FINTRAC will review your application and notify you upon approval.
Documents Required for MSB Application
- Company registration documents;
- Identification documents for owners and staff;
- Business plan;
- Bank account statements;
- Information on AML officer and experience;
- Corporate structure and employee details;
- List of services offered;
- Contact information.
Processing Time
Assuming all requirements are met and documents are complete, the review process takes around three weeks. Obtaining an MSB license can take from a few weeks to several months depending on registration and review times.
Conclusion
An MSB license is essential for businesses offering financial services in Canada. By following these guidelines and complying with AML regulations, you can ensure a smooth application process and contribute to a secure financial system.
International Fintech Business (IFB) can assist with your MSB license registration in Canada. We can help you navigate the complex regulatory landscape, ensuring compliance with FINTRAC’s requirements. IFB’s experts can guide you through the application process, assist with documentation, and offer ongoing support to maintain your license. With our expertise, you can streamline registration and confidently establish your money services business in Canada. Contact us today!
