MSB License in Canada

Q: What are the compliance requirements for an MSB license?

MSBs are generally required to implement and maintain an AML/ATF compliance programme aligned with FINTRAC requirements. This typically includes appointment of a compliance officer, written AML policies and procedures, risk assessment processes, customer identification and verification procedures, employee training, record-keeping obligations, and an independent effectiveness review at least every two years.

Q: How often do I need to renew my MSB registration?

FINTRAC MSB registration generally requires renewal every 24 months. Businesses must also keep registration information current and report certain operational, ownership, or compliance-related changes within the applicable regulatory deadlines.

Q: What happens if I fail to comply with MSB regulations?

Non-compliance with Canadian MSB requirements may result in administrative monetary penalties, regulatory enforcement actions, suspension or cancellation of registration, refusal of future registration, and in serious cases, potential criminal liability.

Q: Do MSB regulations differ by province in Canada?

The primary AML/ATF framework for MSBs in Canada is federal and administered by FINTRAC. However, businesses may also be subject to additional provincial, tax, corporate, consumer protection, or operational requirements depending on the services offered and the jurisdictions in which they operate.

Q: Can foreign businesses register as MSBs in Canada?

Yes. Foreign businesses directing regulated MSB services toward Canadian clients may be required to register with FINTRAC as a Foreign Money Services Business (FMSB), even without a physical office in Canada. FMSBs must comply with applicable Canadian AML/ATF obligations and appoint a representative for service purposes in Canada.

Q: How do I handle changes in my MSB business?

MSBs are required to maintain accurate and up-to-date registration information with FINTRAC. Material changes relating to ownership, operations, compliance structure, or business details must generally be reported within the applicable regulatory deadlines.

Q: Can I start operating before my MSB registration is completed?

No. Businesses that fall within the Canadian MSB registration framework are generally required to obtain FINTRAC registration before conducting regulated MSB activities in Canada.

Q: Do I also need complete registration with Bank of Canada under the RPAA, or is FINTRAC registration enough?

This depends on the business model. FINTRAC registration addresses AML/ATF obligations for MSBs and FMSBs, while the Retail Payment Activities Act (RPAA) administered by the Bank of Canada applies separately to certain payment service providers. Businesses involved in payment processing, merchant settlements, wallets, safeguarding of end-user funds, or similar retail payment activities may require additional RPAA analysis and potentially separate registration with the Bank of Canada.

The Canadian economy has built a reputation for having a stable, secure and internationally compliant financial service industry that attracts foreign-based financial service organizations. The flexible and transparent regulations established by Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) allow for foreign based financial service companies to enter the Canadian marketplace quickly while meeting the lowest regulatory hurdles of any other country in the world.

Canada has become a major global hub for financial innovations and financial services, drawing financial service companies from across the globe. One of the key components of local financial landscape is the Money Services Business (MSB) license which is required to be obtained by any entity that offers any of the following types of financial services: foreign currency exchange; money transmission; or virtual currencies. The purpose of obtaining a MSB license in Canada is to ensure that an entity is operating under guidelines that help to protect against money laundering and the financing of terrorism and comply with the strict standards outlined by the FINTRAC.

Legalaes provides complete support throughout the licensing process and will assist in achieving compliance with all applicable regulatory bodies and frameworks to protect your business. We can also assist in accelerating your entry into Canada’s growing financial industry focusing on both legal protection and growth of your business. Whether you are establishing a new company or expanding an existing operation, we are your partner of choice to obtain a Canada MSB License at the most efficient and successful manner.

Regulations for MSB license in Canada

Financial Transaction and Reports Analysis Center of Canada (FINTRAC) is responsible for supervising and enforcing Anti-Money Laundering (AML) and Anti-Terrorist Financing (CFT) regulations in Canada, as well as to provide assistance to the Government of Canada in identifying and combating criminal activity, such as money laundering. The regulations for the Money Services Business License in Canada are intended to maintain the integrity of the financial system, prevent money laundering, and combat terrorist financing.

Below are some of the most important regulations, and processes for obtaining and maintaining an MSB license in Canada as of 2026:

Regulatory Body

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada’s financial intelligence unit and the federal government agency responsible for supervising compliance with Canada’s Anti-Money Laundering/Anti-Terrorist Financing (AML/ATF) regulatory framework for reporting entities, including money services businesses (MSBs) and foreign money services businesses (FMSBs).

Bank of Canada has oversight responsibility for payment service providers operating in retail payment activities under the Retail Payment Activities Act (RPAA), which is a regulatory framework separate from FINTRAC, and its focus is on the operational risks associated with providing payment services, incident reporting, and the safeguarding of end-user funds.

Depending on the business model, a fintech company may be subject to both regulatory frameworks.

Licensing Requirements

1. Registration with FINTRAC

Before doing business, all Money Services Businesses (MSBs) are required to register with FINTRAC. The registration must be renewed every two years.

2. Regulated Business Activities

The business must provide one or more of the regulated MSB services, such as:

Foreign exchange dealing;
Money transfer;
Issuing or redeeming money orders, traveller’s cheques or similar instruments;
Dealing in virtual currencies;
Crowdfunding platform services.

3. Compliance Program

The business has to create an Anti-Money Laundering/Anti-Terrorist Financing (AML/ATF) compliance program, which includes appointing a compliance officer, creating internal policies/procedures, performing a risk assessment, providing employee training, and conducting an effectiveness review periodically. The compliance program needs to follow the requirements of the Canadian Regulators and the business’s actual day-to-day operations.

4. Record Keeping and Reporting

MSBs need to keep track of each transaction they complete and report various types of activity to FINTRAC on a regular basis. These types of reporting may include Suspicious Transactions, Large Cash Transactions, and Electronic Funds Transfers that exceed the regulatory limits.

5. Client Identification (KYC)

Businesses must establish customer identification and verification procedures and where applicable, use enhanced due diligence for clients that are identified as being high risk.

6. Third-Party Reliance and Agents

Before using third-party agents or vendors to perform compliance related functions or services you need to conduct due diligence for evaluating this party. In addition, ensure that there is a formal agreement in place that outlines the duties and responsibilities of the agent/vendor.

Ongoing Compliance

The business is required to report to FINTRAC on a regular basis, as required by law, including, but not limited to, suspicious transactions and any other mandatory reporting obligations.
FINTRAC will also have the authority to audit the MSB to ensure it has met its reporting obligations.
Additionally, the business must continuously review and improve its AML/ATF Compliance Program to ensure the program reflects the current activities of the business and any new or changed regulatory requirements.
If the business does not meet its obligation under the regulations, the business may be liable for an administrative penalty, fine, or even criminal charges.

Recent Developments

One of the most important recent developments in Canada’s fintech regulatory landscape is the implementation of the Retail Payment Activities Act (RPAA) in 2024 and the launch of the Bank of Canada’s supervisory framework for payment service providers. Businesses performing retail payment activities within the scope of the RPAA may need to register with the Bank of Canada in addition to assessing their FINTRAC obligations.

As of 2026, the RPAA regime has moved into active implementation, including PSP registration, publication of the Bank of Canada registry, and ongoing requirements relating to operational risk management, safeguarding of end-user funds where applicable, and annual reporting.

At Legalaes we constantly keeps track of changes in regulation and develops compliance solutions for our clients.

With Money Service Business license in Canada you can provide following services

Financial service	Description of service
Foreign exchange dealing	Conducting transactions where one currency is exchanged for another (for example, exchanging EUR to USD).
Remitting or transferring funds	Transmitting funds from one person or entity to another using an electronic funds transfer network or other payment methods. This activity commonly includes remittance services, cross-border payments, and certain payment service provider (PSP) models where funds are transferred between users or merchants.
Issuing or redeeming money orders, traveler’s cheques or anything similar	Issuing or redeeming money orders, traveller’s cheques or similar instruments. This does not include cashing cheques made out to a specific person or entity.
Dealing with virtual currency (cryptocurrency)	Providing virtual currency exchange services or virtual currency transfer services.
Crowdfunding platform services	Providing or maintaining a crowdfunding platform that allows persons or entities to raise funds or virtual currency.

Difference between MSB and FMSB registration in Canada

There are two categories of Money Services Business registrations available in Canada:

A registered Money Services Business (MSB), and
A registered Foreign Money Services Business (FMSB).

Both MSBs and FMSBs must register with FINTRAC, Canada’s national financial intelligence unit, and both have obligations under Proceeds of Crime (Money Laundering) Act and Terrorist Financing Regulations (PCMLTFA) Act. The primary difference between the two is the place where the services each can provide. A MSB license in Canada allows a company to provide financial and cryptocurrency services to clients inside Canada and internationally, while a FMSB license in Canada is for foreign financial and crypto licensed businesses, these foreign businesses will be able to provide financial and cryptocurrency services exclusively in Canada’s market. As result choice for registration is dependent primarily on whether the business has a presence in Canada or provides services to Canadian clients from a licensed entity abroad.

MSB – Your business qualifies as a Money Services Business if the following criteria apply:

Providing one or more of the following services:

Foreign exchange dealing;
Remitting or transmitting funds (including certain PSP models);
Issuing or redeeming money orders or traveller’s cheques;
Dealing with virtual currency;
Crowdfunding platform services.

Place of business in Canada:

Incorporated in Canada;
Registered physical office in Canada;
Employees, agents or branches in Canada.

In practice, this is the most common setup for Canadian companies operating abroad.

FMSB – Your business qualifies as a Foreign Money Services Business if the following criteria apply:

You are engaged in the business of providing at least one money services business (MSB) service;
You do not have a place of business in Canada;
Your services are directed at persons or entities located in Canada;
You provide these services to clients in Canada.

Foreign licensed fintech companies providing payment services, remittances, or cryptocurrency services to Canadian customers typically fall under the FMSB registration requirements.

Overview of requirements to obtain MSB license in Canada

Legal entity registered in Canada or Fintech licensed foreign legal entity
Registration with FINTRAC as a Money Services Business
Specifically defined regulated services and business model
AML/ATF compliance program aligned with Canadian regulations
Appointment of a qualified Compliance Officer
Physical office located in Canada
Shareholder and director identification documentation and corporate documentation
Share capital not indicated (recommended 10,000 CAD)
Non-criminal record for shareholder and director
Record-keeping and regulatory reporting setup

Other considerations depending on your business model:

An oversight process for agents, mandataries or outsourced service providers
For payment models: RPAA scope assessment and if applicable PSP registration with the Bank of Canada

Estimated time frames

Gathering documents

1-2 days

Company registration in Ontario

1-5 days

Application preparation and submission

1 week

Review by FINTRAC and MSB registration*

2-4 weeks

*Timelines may depend on volume at FINTRAC and on whether any requests for further information are made during the review of the application.

Legal services for obtaining MSB license in Canada

Basic Package

12,800 USD initial set up

Legal support with Fintech expert
Company name verification and reservation (NUANS)
LTD Company registration with Ontario Business Register
Due-diligence for shareholder and key members
Registered address for 1 year
Assistance with share capital registration
Corporate documents
Pre-registration with FINTRAC
Applying for MSB license
Communication with regulator authority FINTRAC
Assistance with employment of Compliance officer

Registration of the MSB licensed company under the minimum regulatory requirements

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Additional services on request

RPAA registration with Bank of Canada
Physical office space rental, including rental agreement
Provision of dedicated local compliance officer
Provision of local director with financial background
Individual business plan
AML/ATF Policy
Assistance with opening corporate bank account for high-risk
Accounting services
Apostilled corporate documents
Introduction to confirmed software provider
Legal support

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Ready-Made solution

available on request

Registered company
Legal address for 1 year
No debts, no liabilities – clean company
Active license
Corporate documents
Assistance with transfer of ownership

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Edgar Mironov

Head of Regulatory Compliance

Contact Us

Email: info@legalaes.com

Phone: +372 602 8525

Detailed Requirements for payment license in Canada

Below is an overview of the key documentation, compliance requirements, and operational elements typically required for payment license obtainment in Canada. Standards are set by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and are based on our daily experience working with such authorizations.

List of required documents

AML/ATF Compliance Program
- AML/ATF policies and procedures tailored to the company’s services and business model.
- Risk assessment covering products, services, clients and geographic exposure.
- Internal monitoring and control procedures.
- Recordkeeping and regulatory reporting procedures in accordance with FINTRAC requirements.
Application form and FINTRAC Registration Information
- Description of all regulated MSB services offered by the company.
- Business model and operational structure overview.
- Explanation of transaction flows and service channels.
- Submission of required registration information through the FINTRAC MSB/FMSB system.
Corporate Documents
- Articles of Incorporation or equivalent company formation documents.
- Corporate register and governance documentation.
- Identification documents of shareholders and directors.
- Certificate of Incorporation.
Corporate Records (Minute Book)
- Corporate resolutions and shareholder records.
- Articles, bylaws and amendments.
- Any additional relevant corporate governance documentation.
- Resolutions passed by directors and shareholders.
- Annual reports and other significant corporate documents.
Non-criminal record from shareholder and director
- This document can be requested from your local police or similar structure that keeping criminal records.
- If document is issued not in English or French language, then notarised translation into English or French language will be required.

Business premises requirements

Physical Office: FINTRAC requires MSBs to have a physical office in Canada.
Office Options: Companies not planning to use a traditional office space have simplified options such as virtual offices or shared spaces. Consulting with experts like Legalaes can provide more tailored solutions to minimize the costs of the project.

Share Capital and Government Fees

Minimum Share Capital: There is no set for minimum share capital, however based on our experience we would recommend to register at least 10,000 CAD, to indicate our serious intention during application process. (funds can be used for company purposes).
Government Fees: The costs associated with provincial incorporation vary based on the specific province or territory in which you choose to incorporate, our suggested provinces Ontario or Alberta government fee 300 CAD and 275 CAD respectively. FINTRAC does not charge registration fees both for MSB and FMSB licensing.

Personnel Requirements

Compliance Officer
- All Money Services Businesses (MSBs) are required to have a Compliance Officer in place who is responsible for implementing and maintaining the Anti-Money Laundering/Anti-Terrorist Financing (AML/ATF) compliance program of the company.
- The Compliance Officer oversees regulatory reporting obligations and internal compliance procedures.
Director: Although there is no compulsory requirement to have a local director, having one is crucial for opening a local Canadian bank account. The director should have relevant experience and education in the financial sector.

Additional Compliance Considerations

Risk Assessment: Companies must conduct and document a risk assessment tailored to their services, customers, and geographic exposure.
Employee Training: Employees must undergo training regarding MSB obligations (AML/ATF), company procedures, and reporting to regulators.
Compliance Review: The compliance program is to be reviewed periodically to assess whether it continues to be effective and compliant with changing regulatory rules.
Recordkeeping and Reporting: As an obligation under the regulations, MSBs must keep records of transactions and report to FINTRAC, including suspicious transactions and large cash transaction reports, when required.

Obtaining a MSB license in Canada involves preparing compliant documentation and properly organizing your business structure in accordance with the FINTRAC regulations. For some payment and fintech ventures, there may be additional obligations under The Retail Payment Activities Act (RPAA). Our Regulatory Specialists assist fintech companies throughout the entire registration process to help ensure that the registration is set up appropriately and completed timely.

Bank of Canada RPAA – When MSBs Must Register as PSPs

From 2024 year, certain fintech businesses and payment service providers operating in Canada may have to comply with the Retail Payment Activities Act (RPAA), which has introduced a new supervisory framework for payment service providers. A business that engages in a retail payment activity in Canada may be considered a PSP (Payment Service Provider) and may need to register with the Bank of Canada. This includes, but is not limited to, payment processors, money transfer agents, merchants who use digital wallets, merchant settlement services, and any other type of payment related operation.

This new regime operates alongside FINTRAC’s MSB registration and focuses on operational risk management, incident reporting, and safeguarding of end-user funds where applicable. Therefore, if your business model includes payment services in Canada, it is crucial to determine whether you require registration under the RPAA with the Bank of Canada, in addition to a FINTRAC MSB registration.

If you are uncertain about whether your business model qualifies under the RPAA, our regulatory specialists can assess your structure and advise on the appropriate regulatory pathway in Canada.

More information about the RPAA regulatory framework in our detailed guide

Roadmap of obtaining MSB license in Canada

Obtaining a Money Services Business (MSB) license in Canada involves several stages, each requiring careful attention to detail and compliance with regulatory requirements set forth by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

For more detailed road map of the project and commercial offer – get in touch with our FinTech professional.

Jegor Kupratsevits

Head of Fintech

Contact Us

Email: info@legalaes.com

Phone: +372 602 8525

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Gathering documentation and initial project analyses

The project begins by collecting all necessary documentation (corporate and personal) from the shareholders and directors of the Company. The first phase also involves conducting an initial analysis of the business model to determine the regulatory scope of the project, i.e., whether the project will be classified as a Canadian MSB or a Foreign MSB (FMSB), and which services will be covered under the MSB framework (i.e., money transfers, foreign exchange, or virtual currency).

Company incorporation in Canada

If the project has been determined to be a Canadian MSB, the next phase involves incorporating the Canadian Company. The clients submit their preferred company name or names for verification and reservation, and the Company is then formed in the selected province. As part of the incorporation process, the corporate structure and governance of the Company are developed in a manner consistent with the proposed business activities and regulatory requirements of the Company.

Registration with FINTRAC

Once the Company structure and related documentation have been developed and finalized, the MSB registration package is prepared and submitted through the FINTRAC MSB/FMSB registration system. Phase three involves confirming the regulated services to be provided, preparing and submitting the compliance documentation, and providing all other requested information to FINTRAC.

Compliance and operational infrastructure setup

While the Company’s registration is being processed, the operational and compliance infrastructure required for the business is developed. This includes the AML/ATF compliance program, internal policies, customer identification and verification processes, and transaction monitoring systems consistent with FINTRAC requirements.

MSB registration approval

After the Company submits its registration package to FINTRAC, the regulator reviews the Company’s registration package and may request clarification or further documentation. Upon completion of this review process and approval of the Company’s registration, the Company receives its official MSB registration number and is authorized to commence operations within the Canadian regulatory framework.

Corporate bank account opening

Once the Company has received its MSB registration number, the Company can begin the process of opening a corporate bank account (or working with payment processors). As part of preparing for this process, the Company creates documents that detail the Company’s business model, transaction flow, and compliance program, so that the Company can demonstrate to banks and/or payment processors how the Company will operate within the bounds of the required regulations for onboarding purposes.

Optional RPAA / Bank of Canada registration

Depending on the specific payment service provider model implemented by the Company, there may be additional regulatory obligations under the Retail Payment Activities Act (RPAA). If applicable, the Company should prepare a PSP registration application for the Bank of Canada and align its operations with the applicable operational risk management and safeguarding requirements.

Operational launch

Operations begin within the Canadian regulatory framework. Clients are kept updated on changes in legislation or regulations affecting MSBs. Participation in industry groups or associations is encouraged to share best practices and stay informed on compliance issues. Continuous support is provided to enhance the business, with additional services such as local accounting services, agreements, terms and conditions, policies, additional bank accounts, legal opinions, and support being available.

Detailed Time Frames to Obtain a MSB License in Canada

In general, you have to expect some of the following time frames when applying for a Money Services Business (MSB) license in Canada. While the overall time frame can vary depending on your specific business needs and your ability to provide FINTRAC with all the requested information and documents, we have outlined below what you should generally plan for. Please note that the time frames described below represent the average amount of time that other applicants have experienced while applying for an MSB license in Canada, however the actual time frame can be longer depending on your individual situation.

The following is an outline of the time frames associated with each step of the MSB application process. Each of these steps has its own set of tasks and estimated time frames associated with them.

Time Frames for Each Step of the MSB License Application Process

Company Registration and Development of Compliance Programs

Time Frame: 1-2 weeks

Company registration time frame vary on complexity of planned corporate structure and province where the company is going to be registered. Typically it is suggested to register Canadian company in province of Ontario due to lower requirements and quick incorporation process.
A compliance program is a critical component of a MSB license application. A detailed compliance program will require development of a detailed risk assessment and a compliance program to mitigate potential risks identified during the risk assessment.
It is also recommended that a compliance officer be appointed and that the compliance program include training programs for employees to prevent any non-compliance issues
A compliance program must meet FINTRAC’s minimum requirements and can take several weeks to develop depending on the size of the company and the amount of documentation required to demonstrate compliance.

Submission of MSB License Application to FINTRAC

Time Frame: 1-2 weeks

Once all of the required documentation has been completed and reviewed by management, the next step is to submit the license application via FINTRAC’s online portal. The submission process itself is fairly straightforward and typically takes approximately 1 to 2 weeks to complete, although the actual processing of the application could take longer.

Review of Application by FINTRAC

Time Frame: 2-4 weeks

FINTRAC will first perform an initial review of the application to confirm that all of the required documentation was received and that the information contained in the documentation is accurate.
Depending on the level of complexity of the business model presented in the application, there could be further reviews or requests for clarification from FINTRAC regarding the documentation provided.
Any additional reviews or requests for information from FINTRAC could add a significant amount of time to the approval process depending on the length of time it takes for the business to respond to these additional requests for information.

Approval of License and Issuance of MSB Registration Number

Time Frame: 2 days

After the initial review and any additional requests for information have been fulfilled, FINTRAC will then make a determination whether to grant a MSB license to the business. In most cases, this decision is made in just a couple of days. Upon granting of the license, FINTRAC will provide the business with an MSB registration number. This number serves as official confirmation that the business has met the necessary regulatory requirements to operate as a money services business in Canada.

Total Estimated Time Frame

Overall, it is estimated that the average time to obtain an MSB license in Canada is approximately 2 to 3 months. Several factors could influence the timeframe for obtaining a MSB license, including the complexity of the business model, the completeness and accuracy of the application, and the responsiveness of both the applicant and FINTRAC.

Factors Influencing Time Frames

The overall time frame to receive a MSB license in Canada will depend on several different factors, including:

Completeness of Application will greatly determine how quickly the license will be issued. If the application is complete and accurate, the license will be issued in a timely manner. However, if the application is incomplete or inaccurate, it will be subject to delay until the application is complete and accurate.
Regulatory Changes or changes to FINTRAC’s internal processes could potentially cause delays in receiving a MSB license.
Complexity of Business Model may have a longer review period because FINTRAC views them as higher-risk and therefore subject to more scrutiny.
Responsiveness of Applicant to FINTRAC’s follow-up inquiries will have a large impact on the overall time frame to receive the MSB license.

While the typical time frame for obtaining an MSB license in Canada is between 2 and 3 months, businesses can expedite the process by preparing a comprehensive and accurate application, and by providing prompt responses to any follow-up inquiries from FINTRAC. By properly preparing and understanding the regulatory requirements for a MSB license in Canada, businesses can reduce the likelihood of unnecessary delays and expedites the application process.

Advantages of the MSB license in Canada

Strong Compliance Reputation

FINTRAC MSB license registration demonstrates that your company complies with the local AML/ATF regulations. MSB registration also provides a level of credibility amongst banks and other financial institutions, as well as other business partners and potential global counterparts.

Access to Banking Infrastructure

Banks and other financial institutions tend to do business with companies that have been properly registered with government agencies. Being registered as an MSB licensed entity will increase your chances of opening corporate bank accounts, setting up relationships for processing payments and establishing partnerships with financial infrastructure providers.

Access to the North American Market

Canada offers a large, financially-stable marketplace with close ties to the U.S. and major international payment corridors. The ability to register as an MSB enables companies to offer services including, but not limited to: remittance services, foreign currency exchange, crypto exchange, and payment processing services.

Flexible Business Model

The Canadian MSB license obtainment process is flexible and accommodating when it comes to developing a wide variety of financial service-based business models.

Global Recognition

Canada has aligned itself with all of the international AML/CFT standards and recommendations of the FATF. Therefore, being registered as an MSB enhances the credibility of your company’s compliance with AML/CFT regulations globally.

Favorable Setup for International Companies

Both local Canadian companies and international companies providing financial services can obtain an MSB license in Canada. Due to the relative ease of obtaining an MSB license, Canada has become an increasingly popular jurisdiction for international fintech companies that are looking to expand into the North American marketplace.

Links for legislation related to MSB business in Canada

I. Financial Transactions and Reports Analysis Centre of Canada

FINTRAC serves as Canada’s financial intelligence unit, tasked with detecting and preventing money laundering and terrorism financing. It collects and analyzes financial transaction reports from regulated entities, including MSBs, to ensure compliance and safeguard the financial system.

II. Proceeds of Crime (Money Laundering) and Terrorist Financing Act

This act sets the legal framework for combating money laundering and terrorist financing in Canada. It mandates MSBs to implement robust compliance programs, perform due diligence, and report suspicious transactions to help prevent financial crimes.

III. Retail Payment Activities Act (RPAA)

The RPAA (Retail Payment Activities Act) legislates payment service providers operating in Canada. Businesses that provide payment services (such as payment processing, fund transfer services, or payment accounts) may have to register with the Bank of Canada as Payment Service Providers (PSPs).

IV. Bank of Canada – Payment Service Provider Supervision

The Bank of Canada oversees payment service providers in accordance with the Retail Payment Activities Act. All registered PSPs are subject to regulatory oversight from the Bank of Canada to ensure they meet standards around operational risk management, safeguarding, and incident reporting.

V. Ontario business registry

This registry is essential for business operating in Ontario, providing a platform for business registration, filing, and compliance. It ensures that all business entities, including MSBs, adhere to provincial regulations and maintain transparency in their operations.

VI. Canada Revenue Agency

The CRA is responsible for the administration of tax laws for the Government of Canada and for most provinces and territories. MSBs must comply with tax regulations, including reporting their earnings and paying taxes, as part of their operational requirements.

Taxation of MSB Companies in Canada

The taxation of Money Services Businesses (MSBs) in Canada is primarily dependent on the corporation’s residency status, the province in which the corporation operates, and the types of financial services offered by the corporation. Below is an overview of the major tax factors for fintech and payment companies that operate under the MSB model:

Federal Corporate Income Tax

Canadian corporations are subject to federal corporate income tax on all of their taxable income. The normal federal corporate income tax rate is 15%.
If a company qualifies as a Canadian-Controlled Private Corporation (CCPC), it may qualify for the Small Business Deduction on a portion of active business income, subject to certain eligibility requirements and business limits.
The taxable income is determined by subtracting allowable business expenses from gross revenues earned from the provision of services including money transfer, foreign exchange, payment processing and/or virtual currency transactions.

Provincial and Territorial Taxes

In addition to paying federal taxes, corporations must also pay provincial or territorial corporate income taxes based on the location of the corporation’s permanent establishment. Provincial rates vary, for example, the general corporate tax rate in Ontario is approximately 11.5%.
Goods and Services Tax (GST) and Harmonized Sales Tax (HST): Most financial services have exemptions from GST/HST including certain payment and remittance services. Fintech businesses, however, frequently offer ancillary services (e.g., platform access, administration fees, technology components) that may be subject to GST/HST. Therefore, individual evaluation of each revenue stream will be required.

Tax Reporting and Compliance

Corporate Tax Returns: All Canadian corporations must submit an annual T2 corporate income tax return to the Canada Revenue Agency (CRA).
GST/HST Returns: Where applicable, companies must submit GST/HST returns on a regular basis, usually on a quarterly or annual basis depending on the level of revenue.
Record Keeping: Companies are required to keep complete and accurate financial and transaction records for at least 6 years to support tax filings and potential CRA audits.

Specific Considerations for Virtual Currencies

MSBs involved in virtual currencies must recognize revenue based on the fair market value of the assets at the time of the transaction.
Accurate valuation methods and complete documentation of all transactions are necessary for proper tax filing and compliance with regard to digital assets.

Deductible Expenses

Operating Expenses: Typical deductible expenses include rental expenses, payroll expenses, technology infrastructure expenses, professional service fees, etc., and other operational costs.
Regulatory Compliance and Professional Fees: Professional fees associated with regulatory compliance, legal services, AML compliance programs, and licensing preparation, etc., are normally considered to be deductible business expenses.

Tax Planning Strategies

Corporate Structure: Choice of corporate structure and jurisdiction of operation can affect the overall tax position of the company.
Re-investment of Earnings: Canadian corporations can reinvest retained earnings in the company (business development, technology infrastructure, expansion, etc.).
Consultation with Tax Professionals: Fintech businesses as MSBs with complex cross-border operations may require consultation with Canadian tax professionals to achieve compliance and optimal structuring.

Although the Canadian tax regime for MSBs is well established, the tax situation of each company is dependent on its own structure, the services it provides, and its operational presence. It is beneficial for early coordination of regulatory, legal, and tax planning as the business grows to minimize future complexities. Our team frequently assists fintech entrepreneurs in matching their MSB registration to an appropriate corporate and tax structure.

FAQ about MSB license in Canada

1. What are the compliance requirements for an MSB license?

MSBs must establish and maintain an AML/ATF compliance program in line with FINTRAC requirements. The typical components include designating a compliance officer, developing written policies and procedures, completing a risk assessment, and establishing client identification and verification processes. It is also important for an MSB to keep the required records, provide ongoing employee training, and complete an effectiveness review of the compliance program at least every two years.

2. How often do I need to renew my MSB registration?

Every 24 months, MSB registration with FINTRAC must be renewed. Any changes to your registration data, business operations, ownership, or compliance-related information must be submitted to FINTRAC, as appropriate, within the required deadlines, some of which are up to 30 days.

3. What happens if I fail to comply with MSB regulations?

Failure to comply with MSB regulations can result in financial penalties from FINTRAC, regulatory action, suspension of your registration, cancellation of your registration, and/or refusal to register. In extreme situations, failure to comply with AML/ATF regulations can result in criminal charges being brought against the business and the individuals responsible for it.

4. Do MSB regulations differ by province in Canada?

While the overall AML/ATF regulatory framework for MSBs is federal and administered by FINTRAC, depending on how you operate your business, you may also be subject to provincial or operationally specific requirements, including corporate registration, taxation, customer-facing obligations, and other local laws and regulations.

5. Can foreign businesses register as MSBs in Canada?

Yes. Foreign companies that direct and offer MSB services to customers in Canada may need to register with FINTRAC as a Foreign Money Services Business (FMSB), even if they do not have an office in Canada. All FMSBs must comply with the relevant Canadian AML/ATF obligations, and each FMSB must designate a representative in Canada for service purposes.

If your business is looking to service both Canadian and international clients, standard MSB registration should be considered.

6. How do I handle changes in my MSB business?

You are required to keep your registration information current and accurate. Therefore, if you experience a material change in your business, such as a change to your business operations, ownership, address, or other registration details, you must notify FINTRAC within the applicable timeframe. If you fail to advise FINTRAC of a change to your registration information in a timely manner, you may lose your registration and therefore be unable to conduct regulated MSB services.

7. Can I start operating before my MSB registration is completed?

No. A business that operates under the MSB registration regime must obtain registration from FINTRAC before conducting regulated MSB services in Canada. Therefore, you must first confirm your regulatory designation, complete the registration process correctly, and only then commence the regulated services offered by the business.

In practice, the majority of projects seek to build infrastructure with service providers and banking providers during the application timeframe, which is then finalized once the authorization is confirmed.

8. Do I also need complete registration with Bank of Canada under the RPAA, or is FINTRAC registration enough?

This depends on your business model. Registration with FINTRAC covers your AML/ATF obligations as an MSB or FMSB, whereas the RPAA is a separate regulatory framework administered by the Bank of Canada for payment service providers that perform retail payment activities. Therefore, if your business model includes any type of payment processing, holding end-user funds, merchant settlements, wallets, or similar payment functionality, you may require an additional RPAA analysis to determine whether Bank of Canada registration is necessary. Additionally, if you hold end-user funds, you may have RPAA-related safeguarding obligations.