We provide comprehensive guidance through the licensing process, ensuring compliance with all necessary regulatory frameworks to safeguard your business operations. Our tailored services aim to streamline your entry into Canada’s thriving financial sector, emphasizing both legal protection and business growth potential. Whether you are looking to establish a new venture or expand an existing one, Legalaes is your trusted partner in securing a Canada MSB License, with a focus on efficiency and success.

Regulations for MSB license in Canada

Money Service Business (MSB) is regulated by Financial Transactions and Reports Analysis and Analysis Centre (FINTRAC) , which is Canada’s Financial Intelligence Unit (FIU), Anti-Money Laundering (AML) and Anti-Terrorist Financing (CFT) supervision authority. Financial service providers must comply to Canadian laws to assist the government in identifying and fighting criminal activities, including money laundering.

Taxation of MSB companies in Canada

  • Ontario General corporate income tax rate – 11.5%
  • GST (VAT) not applicable for financial and crypto services
  • Ontario tax rate on dividends: 15% non-eligible (net income less than 500,000 CAD) , 38% eligible net income higher than 500,000 CAD

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

Financial serviceDescription of service
Foreign exchange dealing
  • Conducting transactions where you exchange one type of currency for another. For example exchanging EUR to USD.
Remitting or transferring funds
  • Remitting or transmitting from one person or entity to another using an electronic funds transfer network or any other method. This includes remitting or transmitting funds (as instructed by your clients) carried out by means of a credit/debit card if the beneficiary has an agreement with the payment service provider that permits payment by that means for the provision of goods and services.
Issuing or redeeming money orders, traveler’s cheques or anything similar
  • Your business issues or redeems money orders, travelers’ cheques or other similar negotiable instruments. This does not include cashing cheques made out to a particular person or entity.
Dealing with virtual currency (cryptocurrency)
  • This includes both virtual currency exchange and virtual currency transfer services.
Crowdfunding platform services
  • Provision and maintenance a crowdfunding platform for use by other persons or entities to raise funds or virtual currency.

Types of MSB licensing in Canada

Exists two types of financial and cryptocurrency licenses:

  1. Money Service Business (MSB)
  2. Foreign Money Service Business (FMSB)

which must comply with Proceeds of Crime (Money Laundering) Act and Terrorist Financing Regulations (PCMLTFA) Act. Difference between two are that MSB license in Canada provides financial and cryptocurrency services internationally and within the country, while FMSB license in Canada for foreign financial or crypto licensed companies which aim is to provide financial and cryptocurrency services potentially from outside of Canada only on Canada’s market.

MSB – Your business is Money Service Business if following criteria applicable:

Offering one or more of the following services:

  • Foreign exchange dealing;
  • Remitting or transmitting funds;
  • Issuing or redeeming money orders, traveler’s cheques
  • Dealing with virtual currency
  • Crowdfunding platform services

Place of business in Canada:

  • Incorporated in Canada
  • Physical location in Canada
  • Employees, agents or branches in Canada

FMSB – Your business is Foreign Money Service Business if ALL following criteria applicable:

  1. You are engaged in the business of providing at least one money services business (MSB) service;
  2. You do not have a place of business in Canada;
  3. You direct your MSB services at persons or entities in Canada
  4. You provide these services to clients in Canada
  5. Crowdfunding platform services

Overview of requirements to obtain MSB license in Canada

  • Legal entity registered in Canada or Fintech licensed foreign legal entity
  • Company must be registered with FINTRAC
  • Physical office located in Canada for MSB registration with FINTRAC
  • Dedicated and experienced local Canadian Compliance officer
  • Share capital not indicated (recommended 10,000 CAD)
  • Translated and notarized non-criminal record for shareholder and director
  • All necessary measures to comply with AML policies

Estimated time frames to obtain MSB license in Canada

Gathering documents

1-3 days

Company formation

up to 1 week

Pre-application process and analyses

2-3 weeks

MSB license obtainment from FINTRAC*

2-3 weeks

*The timeline also depends on the workload of FINTRAC and any clarifications and queries that FINTRAC may request in relation to 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

Additional services on request

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

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

Edgar Mironov

Head of FinTech Projects

Requirements for MSB licensing in Canada

List of required documents

  • AML/KYC/CFT Policy: Anti-Money Laundering (AML), Know Your Customer (KYC) and Countering the Financing of Terrorism (CFT), the process involves a fintech company confirming its clients’ identities, evaluating the potential for illegal intentions in the business relationship, and actively working to identify, prevent, and report any suspicious activities.
  • Application Form: Complete and submit application form to Financial Transactions and Reports Analysis and Analysis Centre (FINTRAC) for MSB license in Canada, describing nature of business, primary and secondary activities, including descriptions of how and where activities and business will be carried out.
  • Memorandum and Articles of Association (MAA): Legal document prepared during company incorporation, which represents charter of the company.
  • Minute Book: The Minute Book serves as an official repository for all crucial corporate documents. Typically, it includes records such as minutes from shareholders’ and directors’ meetings, articles of incorporation, bylaws, resolutions passed by directors and shareholders, and annual reports.

Business premises requirements

  • For MSB license obtainment in Canada FINTRAC requires to have physical office based in Canada. Exists multiply and simplified options concerning office premises, if company is not planning to use office space. You can contact expert from Legalaes to get more information about such options.

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, therefore no additional charges to register MSB license in Canada.

Personnel Requirements

  • Compliance Officer: Appoint and register in the structure of the company certified and dedicated local Compliance Officer, with relevant background or experience in financial field.
  • Director: No compulsory requirement to have local director, however if you are planning to open local Canadian bank account, local director will become must have requirement. With relevant experience and education in financial field respectively.

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 Forex professional.

Edgar Mironov

Head of FinTech Projects

1

Gathering documentation and initial project analyses

The first step focuses on meticulous initial project analyses and the gathering of necessary documentation for all company stakeholders. This includes understanding the Proceeds of Crime (Money Laundering) and Terrorist Financing Act as it pertains to MSBs in Canada. The preparation of essential documents, such as agreements and compliance manuals tailored to meet specific Canadian regulations, is crucial for organizing a comprehensive application package for submission.

2

Registering LTD business in Canada

This phase involves registering a limited (LTD) company in Canada. Clients must provide 1-3 preferred company names for verification and reservation. The business nature and model are described, and upon the signing of the application, the company is formally registered. Share capital is determined and registered accordingly.

3

Registration with FINTRAC

This stage involves the provision of a registered address and the rental agreement to comply with MSB licensing requirements. A local Compliance Officer is appointed and registered within the company structure. A custom, comprehensive compliance program that includes AML (Anti-Money Laundering), KYC (Know Your Customer), and CFT (Counter-Financing of Terrorism) policies is prepared. This program also includes employee training on these obligations. Necessary documentation is prepared for submission to FINTRAC, followed by the registration process.

4

Provincial Registration

The company must register locally, particularly if operating in specific provinces like Ontario, with the Ontario Business Registry or other relevant provincial bodies. Local requirements are checked, as some provinces may have additional requirements or licensing needs for MSBs.

5

Corporate bank account opening

Based on an analysis of the company’s business activities, the most suitable local banks or EMIs (Electronic Money Institutions) are suggested. Preparation of necessary documentation from both customer and company sides is carried out, potentially including additional documents required by banks. Preparation for an online interview with the bank manager is also undertaken, where our team assists the client in responding to inquiries.

6

Implement Operational Requirements

Business processes are established, including systems for record-keeping, client identification, and transaction tracking to ensure compliance with the established compliance plan. Regular monitoring of transactions for suspicious activities is conducted, with mandatory reporting to FINTRAC. A periodic risk assessment associated with business operations is carried out to update compliance measures as necessary.

7

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.

Advantages of the MSB license in Canada

A Money Service Business (MSB) license in Canada offers numerous benefits that are essential for companies in the financial and crypto industry. Here are some significant advantages:

These benefits make the MSB license an important asset for financial service providers aiming to operate efficiently and expand their business responsibly in regulated markets.

Links for legislation related to MSB business in 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.

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.

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.

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.

Canada MSB license regulatory body

These descriptions provide a quick overview of each act’s main purpose and its role in the regulatory landscape for obtaining MSB license in Canada.

FAQ about MSB license in Canada

1. What are the compliance requirements for an MSB?

MSBs must develop and implement a compliance program that includes policies and procedures for risk assessment, client identification, record-keeping, and reporting of suspicious transactions and large cash transactions to FINTRAC.

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

MSB registration with FINTRAC does not need to be renewed, but any changes in your business details, activities, or compliance framework must be reported to FINTRAC within 30 days of the change.

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

Non-compliance can result in significant penalties, including fines and administrative monetary penalties. Severe or repeated non-compliance could lead to criminal charges or the revocation of your MSB registration.

4. Do MSB regulations differ by province in Canada?

While FINTRAC provides federal regulations, some provinces may have additional requirements or regulations for MSBs, especially in terms of business registration and tax obligations. It’s essential to check with provincial authorities where your business operates.

5. Can foreign businesses register as MSBs in Canada?

Yes, foreign businesses can register as MSBs if they are conducting business in Canada. They must comply with all the same regulations as Canadian-based MSBs and they must have already foreign Fintech license, including appointing a Canadian agent or representative if necessary.

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

You must report any significant changes, such as change in control or business activities, to FINTRAC within 30 days. This helps ensure your registration information remains accurate and up-to-date.

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