Obtaining a Money Services Business (MSB) License in Canada: An Overview

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A finance technology (FinTech) company that wants to offer foreign exchange (forex) brokerage services in Canada must not only have a forex broker license. It must also comply with Canada’s anti-money laundering (AML) laws and regulations combating the financing of terrorism (CFT).

The first step to such compliance is obtaining a money services business (MSB) license, and this article provides an overview of the process of applying for one.

What Is an MSB License?

An MSB license is an authorization that money services businesses obtain from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). FINTRAC is the government body responsible for enforcing the provisions of Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

MSB licensing ensures a business is in compliance with FINTRAC’s guidelines and standards that protect against money laundering and terrorist financing.

Are You a Money Services Business?

FINTRAC considers you a money services business if you offer at least one of these services:

• Foreign currency exchange (Forex or FX): You perform foreign currency exchange when you facilitate the exchange of one currency for another, e.g., a forex broker.
• Money transfer or remittance: You facilitate the electronic remittance of money from one person to another or provide a system that enables invoice payment or currency (fiat or virtual) payments for goods and services.
• Issuance or redemption of negotiable instruments: You issue or redeem money orders, traveler’s checks, and other similar instruments.
• Virtual currency exchange and transfer: You exchange funds for virtual currency or vice versa, or you transfer or receive virtual currency remittances.
• Crowdfunding: If you provide a platform that people can use for crowdfunding to raise fiat or virtual currency.
• Transportation: You have armored vehicles that transport currency and negotiable instruments.
• Encashment: You encash checks for clients.
• Acquirer services: You connect non-bank (i.e., private) automated banking machines with payment card networks.

Canadian MSB vs. Foreign MSB: Which Are You?

There are two types of money services businesses in Canada: Canadian-based MSB (or just MSB) and foreign MSB (FMSB).

You are a Canadian MSB if you have a place of business in Canada. This means any of the following:

• Your business has been incorporated in Canada.
• You have a physical location or address in Canada.
• You have branches, employees, or agents in Canada.

Meanwhile, you are a foreign MSB if you do not have a place of business in Canada (so none of the conditions in the list above applies to you), and both of the following apply:

• You direct your money service/s at persons or entities in Canada (i.e., through marketing or advertising, a .ca domain name, or a Canadian business directory listing).
• You provide your money service/s to clients in Canada.

Example: If you’re a forex broker based in Dubai but you advertise to Canadian residents and businesses and you have clients in Canada, you are an FMSB.

Requirements for Registering as an MSB or FMSB in Canada

To register as an MSB or FMSB in Canada, you must fill out the pre-registration request form. FINTRAC will get back to you and send you the actual registration form.

You need the following information to complete the registration form:

• Bank account details
• Compliance officer information
• Business information: Incorporation information and information (names, dates of birth, etc.) about the business owners and senior management
• Operations information: Number of employees, details about every location, an estimate of your annual total transaction amount (per money service), every agent/mandatary’s information (if you’re a Canadian MSB) or your Canadian representative for service’s information (if you’re a foreign MSB)

The following are also required:

• Criminal record checks
• Translated criminal record checks
• Documents confirming your existence and governance

The criminal record checks are for company leaders or senior management, including the following:

• Chief Executive Officer (CEO)
• President
• Directors
• Individual shareholders who, directly or indirectly, control 20% or more of the shares

The entire MSB/FMSB registration process, from pre-registration and gathering of all documents to licensing approval and actual registration, typically takes six weeks. However, it can be longer, depending on the review queue at FINTRAC, the completeness of your documents, and other verification and regulatory requirements that may apply depending on your services and business model.

Do You Need Assistance From a Licensing Consultant?

Yes, you do. The best approach to MSB licensing is to work with legal consultants who specialize in regulatory registrations, approvals, and compliance.

You’re entering a new market, a market you don’t know and whose laws and policies you must familiarize yourself with to ensure compliance. Instead of wasting precious time on studying local regulations, get licensing assistance and jump right into the registration and application process.

Working with legal licensing consultants is the efficient and cost-effective way to obtain an MSB license in Canada.

Think of it this way. While you probably know accounting and how to prepare financial statements, you still delegate these tasks to someone else. Playing to your strengths means your time is better spent doing something else, i.e., running your business.

Likewise, even if you could gather the requirements, file applications, and follow up with FINTRAC and other entities to proceed with your licensing application, the question remains. Why would you, when somebody other than you could do it much better and quicker, and you have some other things you could accomplish with your time?