If you’re interested in becoming a Money Service Business (MSB) in Canada, this blog post will help you understand the various steps involved in becoming one. It also applies to foreign money service businesses (FMSBs).
The integrity and stability of financial systems are threatened by terrorist financing and money laundering. To address these issues, Canada enacted the PCMLTFA in 2000. It requires financial institutions to take the necessary steps to prevent these crimes.
In order to operate as a money service business in Canada, an entity must first register with the country’s financial transaction monitoring agency, FINTRAC. This blog post will cover the various steps involved in becoming a FMSB or MSB in Canada.
What is FINTRAC?
To operate as a money service business in Canada, an entity must first register with FINTRAC. This is a financial transaction monitoring agency that is responsible for ensuring that the country’s financial transactions are conducted properly.
The Financial Intelligence Unit of Canada (FINTRAC) is responsible for analyzing and preventing financial crimes and money laundering. It monitors the activities of various financial institutions and entities, such as casinos, real estate brokers, and virtual currency dealers.
FMSBs and MSBs are two kinds of entities that FINTRAC monitors. The former are foreign money service businesses that offer services in Canada, while the latter are financial services firms that provide money orders, currency exchange, and other financial transactions.
Why become an MSB or FMSB with FINTRAC?
Those who provide financial services must first register their operations with FINTRAC. Failure to do so could result in penalties and fines. Being a registered MSB or FMS with FINTRAC provides numerous advantages.
Being registered with FINTRAC helps financial firms and businesses comply with the country’s anti-money laundering and terrorism financing regulations. Doing so can help avoid penalties and reputational damage.
The reputation of a financial firm can be enhanced by being registered with FINTRAC. Being able to demonstrate that it is committed to preventing money laundering and terrorism financing can help build trust with its customers.
One of the most important advantages of becoming a registered financial services company with FINTRAC is its ability to expand into new markets. For instance, money transfers are popular among immigrant groups in Canada. Being able to operate as a registered financial services company with FINTRAC can help an organization reach new customers.
Step 1: Determine if registration is required
Before a money service company can become a registered FMS or MSB with FINTRAC, its first step is to determine if it needs to register.
• Money services (e.g., money transfers, currency exchange, and money orders)
• Issuing or redeeming money orders, traveler’s checks, or other negotiable instruments
• Providing virtual currency services
• Conducting foreign exchange transactions
• Conducting account-related services (e.g., wire transfers)
• Lending money (e.g., payday loans)
If your business provides any of these services, you are required to register with FINTRAC.
Step 2: Gather required information
Before a business can become a registered financial services company with FINTRAC, it must first gather necessary information.
• Business name, address, and contact information
• Business structure (e.g., sole proprietorship, partnership, corporation)
• Business activity information (e.g., types of services provided)
• Business identification information (e.g., business registration number)
• Owners and directors information (e.g., name, address, date of birth)
• Information on the person responsible for compliance (e.g., compliance officer)
Step 3: Complete the registration process
After completing the registration process, businesses can start using FINTRAC to monitor and prevent money laundering and terrorism financing.
To become a registered financial services company with FINTRAC, a business must first create an account. This can be done online through the organization’s website.
Once the account has been created, it is necessary for businesses to complete the registration process. The information collected in Step 2 is required to be submitted online or in mail.
Before a financial services company can start using FINTRAC, it must also submit supporting documents. These documents can include a business plan, a risk assessment, and a procedure manual.
Step 4: Maintain compliance
After it has been registered, financial services companies must ensure that they follow the regulations of FINTRAC.
An AML/ATF compliance officer is also required to oversee the company’s activities and ensure that all procedures and policies are followed.
An ongoing risk assessment is also required by financial services companies to check the potential risks associated with their activities.
To minimize the risks associated with their activities, financial services firms must regularly update and document their procedures and policies.
Besides regularly maintaining their policies and procedures, financial services firms also need to provide training to their employees on how to comply with the AML/ATF regulations.
To comply with the regulations, financial services companies must regularly report all suspicious transactions. These are transactions that are not conducted for legitimate business purposes.
Being registered with FINTRAC is also a legal requirement for financial services companies in Canada. It allows them to comply with the Anti-Money Laundering and Terrorist Financing regulations and improve their customer relationships. To become a registered company, financial services firms first need to determine if they need to be registered.
Doing so can help prevent financial services firms from being involved in terrorist financing and money laundering.
If you are a financial services company that needs help becoming an MSB, contact us today for a complimentary discovery call.