Canada’s strong financial sector is commonly known for its security, stability, and compliance with international standards, making it one of the prime hubs for financial institutions.
FINTRAC’s transparent and flexible regulations allow financial institutions to enter the market quickly and comply with the easiest requirements on international markets.
Therefore, Canada remains an important hub for financial services and innovations, attracting different businesses across the globe. An important component of this is the MSB (Money Services Business) license.
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What is an MSB License?
FINTRAC issues a very special license to offer financial services. The license allows businesses to provide quality services to clients globally, apart from countries that need mandatory local licensing. Hence, this makes the license important for startups looking to enter the fintech market cost-effectively.
Types of MSBs
The MSB status in Canada applies to different kinds of businesses engaged in several financial activities. The following are some of the most common forms of MSBs.
- Remittance Processors – A remittance processor provides fast and easy money transfers from people to their acquaintances, friends, and families in other countries. Instarem, Xoom, WorldRemit, and Remitly are good examples of remittance processors.
- Currency Exchanges – These are enterprises that protect, regulate, and organize the exchange of currencies, such as crypto. Examples of global currency exchanges in high demand include Robinhood, Coinbase, Gemini, Forex, and eToro.
- Money Transfer Services – Such businesses successfully transfer cash from one individual to another. Perfect examples are Wise, Flywire, MoneyGram, and Western Union.
- Digital Payment Processors – These are intermediaries between two or several parties that transfer cash. They often provide secure and fast transactions and ensure a connection with banks. Popular processors are SeaMoney, Venmo, PayPal, and Stripe.
Why Register MSBs under FINTRAC?
Undoubtedly, Canada is among the most developed and fastest-growing fintech ecosystems globally, providing innovative systems and solutions in money and payment services.
Canada-based businesses benefit from taxation systems fortified by several income treaties and operate on the basis of self-assessment.
Moreover, the country maintains a strong bilateral and healthy relationship with the US, providing investors with the added advantage of aligning with the US economic policies. Because of this, registering MSBs under FINTRAC doesn’t include registration fees.
Key MSB License Requirements
Getting an MSB license in the country is necessary for businesses engaged in money transfer, currency exchange, and financial service operations. Often regulated by the FINTRAC, requirements for MSB licensing aim to curb terrorist financing and money laundering. Here are the key requirements:
1. FINTRAC Registration
All MSBs must register with FINTRAC before they start their operations. It requires you to provide detailed information about your company.
2. AML (Anti-Money Laundering) Programs
Businesses must implement and develop comprehensive AML programs.
3. Record Keeping & Reporting
An MSB must maintain a detailed record of every financial operation and transaction and report suspicious transactions and activities about a certain threshold to FINTRAC.
4. Appointment of Compliance Officers
Companies must appoint compliance officers liable for liaising with FINTRAC and ensuring regulatory obligations are adhered to.
5. Maintaining an MSB License
To maintain MSB status, a company must update its FINTRAC registration and keep all corporate information and documents current.
In conclusion, technological advancements, emergency market opportunities, and regulatory changes heavily control the country’s MSB sector. Staying current with compliance requirements, investment prospects, and the latest trends is important for navigating this sector.