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How To Conduct a Risk Assessment for MSBs in Canada

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Conducting a risk assessment for Money Services Businesses (MSBs) in Canada is crucial to identify and manage potential money laundering and terrorist financing risks. With the evolving regulatory landscape and the emergence of new trends, MSBs need to enhance their controls and reporting mechanisms to stay compliant and mitigate risks effectively.

Key Takeaways

  • Stay updated on regulatory changes in the online gambling industry to adapt risk assessment processes accordingly
  • Thoroughly identify money laundering risks specific to MSBs and implement robust risk assessment measures
  • Enhance controls and reporting mechanisms to improve detection and reporting of suspicious activities
  • Monitor emerging suspicious trends and patterns to proactively mitigate risks
  • Collabourate with regulatory authorities and utilize available resources to strengthen risk assessment processes

Risk Assessment Process for MSBs in Canada

Identification of Money Laundering Risks

Identifying money laundering risks is a critical step in safeguarding the integrity of financial operations within Money Services Businesses (MSBs). FINTRAC emphasizes the importance of evaluating money laundering indicators within the full context of a client’s behavior and relevant circumstances. MSBs must be vigilant in recognizing suspicious patterns of activity or transactions that may indicate money laundering efforts.

To effectively identify these risks, MSBs should consider the following risk factors:

  • Products, services, and delivery channels that create anonymity
  • Obscure sources or destinations of funds
  • Transactional and contextual indicators

Substance Law can provide expert guidance in navigating these complex risk factors and ensuring that your risk assessment is comprehensive and up-to-date.

By adequately assessing systemic risks and appropriately responding to them, market integrity is enhanced, and the financial infrastructure is strengthened.

MSBs have strict statutory and regulatory obligations to monitor transactions and report any suspicious activities. Implementing robust internal systems to detect and report such activities is not just a regulatory requirement but a cornerstone of a trustworthy financial institution. Substance Law can assist in developing the appropriate policies, procedures, and internal controls to maintain ongoing compliance and protect your business from the reputational and legal repercussions of money laundering.

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Enhancing Controls and Reporting

In the wake of the Cullen Report, which highlighted the money laundering risks associated with MSBs, it is imperative for these businesses to enhance their controls and reporting mechanisms. Substance Law recognizes the importance of robust compliance systems and offers expert guidance to navigate Canada’s AML regime effectively.

To ensure compliance with the latest regulatory requirements, MSBs must establish a comprehensive Anti-Money Laundering (AML) program that includes customer due diligence (CDD) and an enhanced due diligence (EDD) program for higher-risk relationships. These programs are not only a regulatory necessity but also serve as a frontline defence against financial crimes.

Periodic reporting is a critical component of an AML program. It allows for the ongoing monitoring of transactions and the timely submission of reports to regulatory bodies.

Emerging Suspicious Trends

As the digital landscape evolves, so do the methods employed by those seeking to exploit the financial system. FINTRAC’s Annual Report 2022-23 highlights a significant shift towards underground banking through unregistered MSBs, a trend that requires vigilant monitoring and robust risk assessment strategies. Money Service Businesses (MSBs) must remain alert to the various indicators of money laundering, which include but are not limited to:

  • Products, services, and delivery channels that create anonymity
  • Transactions linked to high-risk jurisdictions
  • The use of new developments and technologies by clients
  • Client characteristics that deviate from expected norms

It is imperative for MSBs to integrate these indicators into their risk assessment frameworks to effectively identify and mitigate potential threats.

Substance Law recognizes the complexities involved in adapting to these emerging trends and stands ready to assist MSBs in enhancing their compliance programs. By staying informed about the latest suspicious patterns of activity, such as those related to online gambling, MSBs can proactively adjust their controls. The table below summarizes key suspicious trends identified by FINTRAC:

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Suspicious Trend Description
Chip-dumping in poker Indicative of illicit activity such as match fixing
Multiple below-threshold transactions Aimed at avoiding reporting thresholds
Use of common bank accounts Multiple online players using the same account for disbursements

Substance Law can provide the knowledge needed to navigate these challenges and ensure that your risk assessment process is comprehensive and up-to-date.


In conclusion, conducting a risk assessment for Money Services Businesses (MSBs) in Canada is crucial in order to mitigate money laundering and terrorist financing risks. The recent regulatory changes in the online gambling industry have highlighted the importance of identifying and managing these risks effectively. By following the guidance provided by FINTRAC and implementing robust controls, MSBs can enhance their detection and reporting of suspicious transactions. It is imperative for MSBs to stay vigilant and proactive in addressing the evolving landscape of financial crimes in order to maintain compliance and protect the integrity of the financial system.

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Frequently Asked Questions

How do online gambling sites pose a risk for money laundering in Canada?

Online gambling sites that allow cross-border payments from Canada-based players without proper customer due diligence or betting limits can facilitate money laundering. Criminals may also use virtual currencies and mixers to obfuscate proceeds of crime.

What guidance did FINTRAC provide regarding money laundering risks in online gambling?

FINTRAC issued a Special Bulletin to help entities involved in online gambling, banks, and MSBs identify and manage money laundering and terrorist financing risks. The bulletin aims to enhance controls and improve detection and reporting of suspicious transactions.

What regulatory changes have impacted the online gambling industry in Canada?

Recent legalization of single event sports betting and introduction of new gambling operators have led to significant regulatory changes in the online gambling industry in Canada. FINTRAC warns about the risks associated with online gambling sites outside legal control.

What are the emerging suspicious trends related to money laundering through online gambling sites?

Emerging trends include the exploitation of financial entities and MSBs by unlicensed gambling sites, transfer of funds to Canadian accounts from jurisdictions with weak AML regimes, and use of secretive banking methods for money laundering.

How has Canada’s assessment of money laundering risks in online gambling evolved over time?

Canada’s Updated Assessment of Inherent Risks of Money Laundering and Terrorist Financing raised concerns about the very high threat posed by unlicensed online gambling, especially in areas with weak AML laws.

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