Obtaining MSB license in Canada | Law&Trust International

Financial license of Canada

The banking system of Canada is considered as one of the most reliable systems in the world. It survived the global crisis, and now the country with the ninth largest economy in the world is the only one that meets all the requirements, such as property rights, technology, innovations, tax, level of corruption, state of the securities market, bureaucracy and investor protection.

The payment systems in Canada, as well as the banks, play the important role in the financial sector. The government of Canada set fairly loyal requirements for the companies intending to provide financial services, thereby attracting not only local citizens, but also foreigners in the development of the financial sector.

What license would you need to be granted to provide financial services and enter the Canadian market?

Что такое MSB лицензия в Канаде?
Что такое MSB лицензия в Канаде?

Description and Purpose of MSB License

MSB financial license.
MSB financial license.

License type - Money Service Business (MSB)

MSB is a non-bank financial institution that allows carrying out the following types of financial activities:

  • Currency exchange services;
  • Provision of money transfer services;
  • Issue or redemption of traveler's checks, money orders or bank charges;
  • Check cashing;
  • ATM operation, including the lease of commercial facilities for ATM location, if the lessor is responsible for the cash supply by the bank;
  • Virtual currency transactions.

If you work in the money services business (MSB), you need to know about all the obligations that apply to you. This includes the registration of your business, reporting, record maintenance, knowing your customers and having a compliance program.

Legal services for obtaining a financial license in Canada.
Legal services for obtaining a financial license in Canada.

Who Needs This License?

MSB license (Currency Exchange, Money / Virtual Currency Transfer License) will be required if you run business in Canada to offer any of the following services to the public:

Currency Exchange
Conducting transactions in which you exchange one type of currency for another (for example, exchanging U.S. dollar for the Canadian dollar). However, you should remember that the purchases made for foreign currency are not considered as the foreign currency.
Money Transfer
Money transfer from one individual or legal entity to another using the electronic money transfer network or any other method.
Issue or redemption of money orders, traveler's checks or other similar negotiable instruments.
Trading in Virtual Currency
It includes virtual currency exchange and transfer services.

The virtual currency exchange services include the exchange of:

  • cash funds for virtual currency;
  • virtual currency for cash funds;
  • virtual currency for another virtual currency.

The services on transferring virtual currency as a payment instrument include:

  • virtual currency transfer (sending) at the client’s request;
  • receipt of the virtual currency transfer for transferring to the recipient.

The new legislation in Canada, which came into force in early June 2020, has opened the green light for crypto-exchanges, as well as for payment operators dealing with crypto-currencies. Now, these organizations are officially classified as the financial service providers.

You are also considered as the financial services business and provide settlement services if:

  • You have permission or license for any of the said services;
  • You are registered as the provider of any of the said services;
  • You advertise that you are participating in any of the said services;
  • You do not advertise any MSB services, but you:
    • offer money transfer services for any amount;
    • conduct currency transactions amounting to more than $ 1,000 within one transaction with the same individual or legal entity;
    • make money orders, traveler's checks or other similar negotiable instruments amounting to more than 1,000 U.S. dollars during one transaction with the same individual or legal entity.
  • You report income from any of the said services as income from the standalone business for tax purposes.

License Issuance Procedure

FINTRAC (Financial Transactions and Reports Analysis Center of Canada) is the financial intelligence agency, which reviews the documents and decides on the license issue.

Step №1 - Company registration in Canada

  • You can choose any province to set up a company. For non-residents, British Columbia is the most suitable option.

  • Name. The company name should contain at least two words, one of which should describe the company’s main business, for example, "payments", "money transfers", etc. The abbreviations are not accepted.

  • Registered address. The company should rent office and show the lease contract in force, as well as the photo of its premises at the stage of obtaining the license.

  • Уставной капитал. Минимальный капитал не определен контролирующим органом, но желательно внести и оплатить определенную сумму уставного капитала для того, чтобы показать регулятору серьезность намерений по планированию и развитию бизнеса.

  • Authorized capital. The minimum capital is not determined by the supervisory authority, but it is advisable to deposit and pay a certain amount of the authorized capital in order to show the regulator the seriousness of intentions for business planning and development.

  • Management. At the registration stage, at least one director should be appointed - the individual with experience in the financial sector.

Step №2 - Preliminary registration with FINTRAC

Including the interview with FINTRAC representative. The following information should be provided

List

  • Name of the company that is going to obtain the license;
  • Legal (actual) address of the company;
  • Contact details of the company representative;
  • Description of the services and activities the company plans to provide.

Step №3 - Registration in FINTRAC

For registration, you should submit the following information.

List

  • Information about the company's bank account;
  • Information about your Compliance Officer;
  • Staff headcount;
  • Registration information (if your business is a corporation);
  • Information about the owners of your MSB and senior management - for example, their name and date of birth (about the company directors and each person who owns or controls 20% or more);
  • Estimate of the expected total amount of transactions in U.S. dollars per year for each MSB service you provide;
  • Detailed information about each branch;
  • Details about each MSB agent.

Our Services

During FINTRAC (Financial Transactions and Reports Analysis Center of Canada) review, it is important to demonstrate that you have the necessary documentation and that the employees, agents and all other persons authorized to act on your behalf are well trained and can effectively implement all elements of your compliance program.

The lawyers of our company with many years of experience in obtaining financial licenses and practice in interacting with the regulatory authority will help you to correctly prepare the documents necessary for issuing a license, recruit staff and represent the interests of your company in the process of obtaining the license.

We provide the following services in the process of obtaining MSB license:

  • Company registration in Canada;
  • Provision of the legal address in Canada;
  • Assistance in choosing an office for the company in Canada;
  • Assistance in recruitment of the qualified director and Compliance Officer;
  • Assistance in opening the company’s bank account;
  • Registration with FINTRAC before receiving full authorization;
  • Development of the full package of internal documents (including the written compliance policies and procedures, current compliance training program, risk assessment and appointment of the compliance officer);
  • Development of additional documents (T&C, Privacy policy);
  • Consultation at all stages of the process before obtaining the permission.
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