FINTRAC Policy Interpretations

Money services businesses

Foreign exchange dealing in relation to remitting/transmitting

Question:

What is the definition of foreign exchange in order to determine whether a money services business (MSB) is engaged in the business of foreign exchange dealing in addition to being engaged in the business of remitting and transmitting funds?

Answer:

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations do not define the term foreign exchange. That said, paragraph 5(h) of the PCMLTFA identifies that “persons and entities engaged in the business of foreign exchange dealing…” are subject to the PCMLTFA and its associated Regulations as MSBs.

To determine whether an entity is engaged in the business of foreign exchange dealing in relation to its remitting and transmitting activities, it is important to consider the client-initiated instructions, and to understand that these instructions may be a single set of instructions that involves two components – the exchange of funds and the transmission of client-initiated instructions for the transfer of funds.

For example, a client may conduct a foreign currency exchange with an MSB and order the MSB to transfer the exchanged funds to their bank account, or a third party bank account, outside of Canada. In this instance, if the threshold amounts are met, record keeping obligations exist at paragraphs 30(e) and (f) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), for both the foreign exchange transaction and the electronic funds transfer (EFT); reporting obligations also exist for the EFT at paragraph 28(1)(b) of the PCMLTFR, as applicable.

Some additional criteria to consider, that may help to determine whether an MSB is engaged in the business of foreign exchange dealing, is whether the MSB sets the exchange rate and whether the MSB converts the funds.

Date answered: 2016-09-28

PI Number: PI-6913

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 28(1)b), 30e), 30f)

Act: 5h)

Mobile services

Question:

What information should be included in the registration form if the agents of a money services business (Money Services Businesses) are mobile and offer services from a truck?

Answer:

Pursuant to Part C of Schedule 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations, an MSB is required to provide FINTRAC with information on all of its agents, mandataries and branches. In particular, the MSB must provide :

  • Trade names, operating names and legal names of every agent or mandatary
  • Business address, business telephone number and, if applicable, business e-mail address and website of every agent, mandatary or branch
  • Activity or activities referred to in item 9 of Part A that are carried out by agent, mandatary or branch
  • Where agent or mandatary is not a person or entity to which Part 1 of the Act applies, address of all locations where the activity or activities referred to in item 9 of Part A are carried out
  • Relationship to applicant (whether agent, mandatary, branch or other).

In the scenario provided, where the agents may be using trucks to travel and provide mobile electronic funds transfer (EFT) services, this same information would be required.

That said, the address information we would expect in the “main address location” would be that of the agent's bricks and mortar business associated with the truck.  Any information related to the mobile activities of that agent would then be included in the section for “additional agent locations”.  The MSB registration form allows for the agent's bricks and mortar address to be used again in this section, unless the mobile business has its own legal address listed in business documentation. The reporting entity may consider using the license plate or vehicle details as identifiers in the registration form.

Should the agent solely be mobile, and not have a bricks and mortar location, we would expect the business address listed in the business licensing or documentation of that agent's mobile business to be included as the main address location. 

Date answered: 2016-04-14

PI Number: PI-6415

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 4

Regulations: Schedule 1

Information regarding money transfers

Question:

How much is a customer allowed to send and is it mandatory to get a customer's signature when conducting a transaction?

Answer:

The PCMLTFA and its associated Regulations do not set limits on the amounts that can be transferred, nor does this legislation require that a reporting entity obtain a signature when conducting a transaction. That said, there are specific client identification, record keeping, and reporting requirements related to certain transactions conducted by reporting entities that must be met.

Date answered: 2016-04-08

PI Number: PI-6413

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 6C

What kind of tuition?

Question:

I am wondering whether entities engaged in the business of tuition payments sent to private education institutions are considered to be money services businesses (MSBs)?

Answer:

FINTRAC has previously taken the position, and continues to uphold the position, that persons or entities engaged in the business of tuition payment services, that involve the “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network”, are not considered to be MSB because they are not engaged in the business of remitting or transmitting funds for the sake of the service. The transfer of funds is simply a corollary of their actual service, which is payment processing.

FINTRAC has not gone further to specify to which type of education institution these tuition payments must be sent. As such, entities engaged in the business of tuition payment services to public or private education institutions are not considered to be MSBs because the transfer of funds is a corollary to their payment processing service.

Date answered: 2016-03-18

PI Number: PI-6405

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Recourse for MSB who are not registered

Question:

Can two individuals remit funds without registering as an MSB with FINTRAC? For example, Tom lives in Country A and wants to send money to a friend in Country B. Jerry also lives in Country A and is travelling to Country B and will deliver Tom's money to his friend in Country B. Is Jerry an MSB?

Answer:

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Transferring funds from one individual or organization to another using an electronic funds transfer network or any other method such as hawala, hundi, fei ch'ien, and chit.; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

It is not for FINTRAC to dictate how a person may wish to convert their money, or send money to another person. However, if a person or entity offers any of the services listed above without being registered with FINTRAC, then they are doing so in contravention of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

Alternatively, if the person or entity is registered with FINTRAC, but is not carrying out any of the obligations (e.g., record-keeping or reporting), then the person or entity is also in contravention of the PCMLTFA. In either case, that person or entity may be assessed penalties or incur other consequences.

Date answered: 2015-12-15

PI Number: PI-4441

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

Cross-border transactions by a web-based service

Question:

Our company will provide a web-based service which allows clients to convert currency and transfer/remit the converted funds across the border between a foreign country and Canada. Should our company be registered as a money services business with FINTRAC?

Answer:

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information provided, it appears that your entity is, at this time, engaged as an MSB as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

Date answered: 2015-12-07

PI Number: PI-6381

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

Registration requirements of MSBs in Canada

Question:

Could you clarify the registration requirements for money services businesses (MSBs) in Canada? More specifically,

  1. Would an entity that is not resident in Canada qualify to register as an MSB?
  2. Can the compliance officer of a money services business work and/or reside outside of Canada? Are there any educational pre-requisites applicable to the individual appointed as the compliance officer?
  3. Is there a requirement that the reports submitted to FINTRAC by a money services business (whether electronically or by paper reporting) be submitted from within Canada?

Answer:

1. MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In addition to determining whether you are engaged as an MSB, it must also be determined that you have a "real and substantial connection" with Canada. Some of the criteria considered to establish whether a person or entity is “engaged in the money services business in Canada" include if the business:

  • is incorporated in Canada;
  • has agents in Canada;
  • has physical locations in Canada; or
  • maintains a bank account or a server in Canada for the purposes of carrying out MSB activities (among others).

Unless there is a substantive connection to Canada, we do not consider the entity as conducting an MSB in Canada; therefore, the entity cannot register as an MSB with FINTRAC.

2. An entity that is an MSB in Canada must, pursuant to paragraph 71(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), appoint a person to be responsible for the implementation of the entity's compliance program. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the PCMLTFR do not require the Compliance Officer to work and/or reside in Canada. Furthermore, neither the PCMLTFA nor the PCMLTFR outline education or training requirements for the entity's Compliance Officer. That said, FINTRAC has outlined, in Guideline 4: Implementation of a Compliance Regime, the following as considerations when appointing the entity's Compliance Officer, namely that the individual:

  1. should have the authority and the resources necessary to discharge his or her responsibilities effectively;
  2. should report, on a regular basis, to the board of directors or senior management, or to the owner or chief operator;
  3. should be from a senior level and have direct access to senior management and the board of directors, the case of a large business;
  4. should not be directly involved in the receipt, transfer or payment of funds; and
  5. could be a senior manager or the owner or operator of the business, in the case of a small business.

3. Finally, an entity that is an MSB in Canada must, pursuant to the requirements of the PCMLTFA and its associated Regulations, submit certain reports to FINTRAC. There is no requirement that these reports be submitted from within Canada.

Date answered: 2015-12-03

PI Number: PI-6376

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1, 4

Regulations: 1(2), 71(1)(a)

Act: 5h). 11.11

Escrow services for charities, not covered

Question:

Should our company be registered as a money services business with FINTRAC? We would like to offer escrow services to charities.

Answer:

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, specifically that “only for the purposes of charitable donation cheque exchanges, we would like to offer cheque escrow services such that matching funds are only released to donor and charity participants upon all funds clearing in the escrow account,” it appears that your business is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. As such, you cannot register with us.

Date answered: 2015-11-25

PI Number: PI-6375

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

"Pay-out" service covered

Question:

Our company will offer “pay-out” service to clients (“merchants”). The merchants can instruct our company to pay its international customers or suppliers (“end recipients”). To offer this service, our company will establish local bank accounts in various countries (including Canada) and will, at the request of the merchants, pay the end recipients through domestic transfers. As a result, should our company be registered as a money services business (MSB) with FINTRAC?

Answer:

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In addition, because your company is international, it must also have a “real and substantial connection” with Canada to be considered an MSB. The criteria considered to establish a real and substantial connection include if the business:

  • is incorporated in Canada;
  • has agents in Canada;
  • has physical locations in Canada;
  • maintains a bank account in Canada; or
  • maintains a server in Canada for the purposes of carrying out MSB activities.

Based on the information provided, it appears that as a result of its “pay-out” service, your company will offer remitting or transmitting services to your merchant clients to facilitate payment to the end recipients. Additionally, your company will maintain a bank account in Canada, thus establishing a real and substantial connection. As such, it appears as though your company will be engaged as an MSB in Canada, as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

To further clarify, you asked whether your company would be considered an MSB as a result of the following summarized scenarios:

  1. Pay-out service provided to merchants outside of Canada to pay end recipients in Canada
  2. Pay-out service provided to merchants in Canada with end recipients outside of Canada
  3. Pay-out service provided to merchants in Canada with end recipients in Canada
  4. Pay-out service provided to merchants outside Canada to pay end recipients outside Canada

Your company would be considered to be engaged as an MSB in Canada in all of these scenarios, with the exception of number 4, which has no connection with Canada.

You have also asked whether the requirements would differ if the summarized scenarios above were offered by a Canadian incorporated subsidiary of your company. If this were the case, the Canadian incorporated entity would be required to register with FINTRAC and identify your company as an owner.

Date answered: 2015-11-09

PI Number: PI-6369

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

Buying/Selling virtual currency for own purposes

Question:

I purchase virtual currency from an online virtual currency exchange. I have a personal account with them that I fund from a personal bank account that I hold.

With the virtual currency that I purchased, I then visit a local trading site in order to find people that want to buy my virtual currency. The local website specializes in matching buyers and sellers. I have a personal account with the local trading site. When a buyer purchases my virtual currency, I receive funds directly from the individual.

This is entirely the makeup of my trading activity.

So, if I sell virtual currency to Canadian citizens/entities under the trading methods that I outlined above, am I required to register with FinTRAC?
Same question as above, but am I required to register with FinTRAC if I do NOT conduct trades with non-Canadian citizens/entities?

Answer:

The Government of Canada has made changes to what services make an individual or an entity an MSB in Canada to include virtual currency services; however, these changes are not yet in force. Individuals and entities engaged in the business of dealing in virtual currency services will be MSBs, but cannot yet register with FINTRAC. Before these individuals and entities will be subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), regulations need to be written to define what it means to be engaged in the business of providing services such as dealing in virtual currency.

Until these regulations are drafted and in force you are an MSB, and required to register with FINTRAC, if you are engaged in the business of providing any of the following services:

  • Foreign exchange dealing (conducting transactions where you exchange one type of currency for another currency);
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Therefore it is only if you are carrying out any of the services listed above, on behalf of clients, that you will be considered an MSB and will be required to register with us.

Based on the information you provided, it appears you are not providing any of the MSB services identified above, therefore, at this time, you are not engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations and cannot register with us.

Date answered: 2015-10-16

PI Number: PI-6367

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

Processing payments

Question:

Should our company be registered as a money services business with FINTRAC? We will pay provide payment processing services to merchant clients to pay their suppliers. Both the merchants and suppliers will have accounts with us. Upon receipt of payment instructions from a merchant client, we will pay a specific amount owed on the merchant's behalf to the supplier's account.

Answer:

A money services business (MSB) has the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, it appears that your business will facilitate payments between Canadian businesses and their suppliers. Your business will enter into written agreements with its clients for the provision of these services and payments will be made using your business payment network. As a result, it appears that your business will be remitting and transmitting funds at the request of a client and is therefore, at this time, engaged as an MSB as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

Although you have asserted that your business services fall under the category of payment processing, FINTRAC's position on this matter is that, at this time, only persons or entities engaged in the business of utility payments, payroll and commission services, mortgage and rent payment services, and certain tuition payment services, that involve the “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network”, are not considered to be MSBs because they are not engaged in the business of remitting or transmitting funds for the sake of the service. The transfer of funds is simply a corollary of their actual service, which is payment processing. It is therefore only those businesses that engage in the specific services identified above that may be considered as offering payment processing services.

Date answered: 2015-10-06

PI Number: PI-6364

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

Cross-border transactions matching senders to beneficiaries

Question:

Should our company be registered as a money services business with FINTRAC? We will run an ecommerce business that enables global swapping of goods, services and currency without need for international transfers. Our business connects two individuals in different countries who wish to transfer money without the need for cross-border transactions. All transactions are local and the balance of transfers is net zero between countries. Unlike traditional money transfer businesses, no physical agents are involved, all transactions are electronic and exchange rates are mutually determined by the sender and receiver.

Answer:

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, it appears that your company will facilitate cross-border transactions by matching senders to beneficiaries in their home countries, and that all transactions will be conducted through your company. Specifically, you state that “Two individuals wanting to transfer money are matched on our ecommerce platform. For ease of explanation, we refer to these individuals as Sender A in country X and Sender C in country Y. Sender A desires to transfer a certain amount to Receiver B in country Y while Sender C who desires to send money to Receiver D in country X,” and that your company "enables money transfer after this deal by facilitating local transfer from Sender A to Receiver D and from Sender C to Receiver B. In country X, Funds will flow from Sender A to your company who deposits the funds in an account belonging to Receiver D. In country Y, Funds will flow from Sender C to your company who deposits the funds in an account belonging to Receiver B.”

As a result, it appears that your entity is providing remitting and transmitting services and is therefore engaged as an MSB as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

Date answered: 2015-09-11

PI Number: PI-6358

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

Canadian MSB wholly owned by an international business

Question:

Our international business is registered as a money services business (MSB) with FINTRAC. We have incorporated a Canadian entity. How does the creation of this entity affect our currently registered MSB?

Answer:

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments.

Based on the information provided, it appears that the Canadian entity will have its own Canadian bank account and will be used to service clients within Canada. As such, the Canadian entity is engaged as an MSB in Canada and is required to register with us. It must also indicate in field B13 of the registration application that it is wholly owned by the international business.

Additionally, based on the information you have provided, it appears that all Canadian services will be offered by the Canadian entity. If this is the case, the international business is no longer required to be registered with FINTRAC and must submit a cessation form.

Date answered: 2015-08-24

PI Number: PI-6348

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

Small loans - not covered

Question:

Our company is proposing to enter into loan agreements with small and medium-sized Canadian businesses (each, a borrower) who wish to finance the purchase of goods from unaffiliated suppliers located outside of Canada. Each loan agreement will include a direction to pay, from the borrower, directing our company to pay 100% of the loan proceeds to the applicable supplier. If the loan is approved, our company will instruct its financial institution to wire the loan proceeds from our company's account with the financial institution to an account designated by the supplier, in accordance with the direction to pay.

For clarity, no loan proceeds will be wired to the borrower and no funds will be wired from the borrower to the supplier under our company's proposed arrangement.

Should our company be registered as a money services business with FINTRAC?

Answer:

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments.

As a result of the information you provided, it appears that your company will only engage in the transfer of funds as a corollary of its actual service, which is to provide loans to small and medium-sized businesses. Therefore, it appears that your company is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. As such, you cannot register with us.

You have also indicated over the phone that your company is not subject to the Trust and Loan companies Act, is not a trust company nor a loan company regulated by a provincial Act. Therefore, you are also not considered to be a financial entity subject to Part 1 of the PCMLTFA, as defined under subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR).

Date answered: 2015-06-16

PI Number: PI-6339

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5d), e), f), h)

Operating as an MSB?

Question:

My client's business is based in Canada and sells goods in Africa to North Africans. Revenues generated from this activity are in the local North African currency, usually the Tunisian dinar. It is not possible to physically take dinars out of Tunisia.

In order to operate the business, my client needs to be able to re-patriate the capital generated from the sales to Canada. The revenues from the business' sales are in one or more North African currency, usually the Tunisian dinar. The Canadian business needs to have these revenues in Canadian dollars. This is accomplished through informal channels such as social media groups for North African ex-patriots living in Canada. My client posts on social media groups that he wants to sell dinars and an interested buyer will respond. Alternatively, my client will deal directly with a private individual within their network who wants to buy dinars. The exchange is based on the market exchange rate. My client does not generate revenues from this activity; no fee or mark-up is included in the transaction. The dinar purchaser meets my client in Canada and gives my client Canadian dollars. My client then informs and authorizes their representative in Tunisia to give dinars to the person designated by the buyer. My client would like clarification as to whether this element of the business would qualify it as a money services business.

Answer:

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments.

Based on the information you provided, it appears that your client is engaged in foreign exchange dealing and therefore, is, at this time, an MSB, as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations.

Date answered: 2015-05-14

PI Number: PI-6309

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Crowdfunding campaigns

Question:

Our company will allow a user to setup a profile and a campaign with his/her story and pictures, requesting to borrow funds for his/her needs. The user will then share the campaign page on social networks and email family and friends to visit the campaign page and fund the campaign. Family and friends, and general public will fund the campaign based on the story. They will be able to easily make the payments using their Canadian bank accounts. Once the campaign is funded, the funds will be transferred to the user (interest free) and we will debit their bank account monthly for a fixed amount based on user's payback/repayment schedule. The repayment schedule will be visible under their campaign page for all users to see as they make payments.

Should our company be registered as a money services business with FINTRAC?

Answer:

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Given you state that, once a campaign is funded, the user's bank account will be debited monthly based on a payback/repayment schedule, it appears your business will only engage in the transfer of funds as a corollary of its actual service, which is to provide a platform that allows individuals and entities to fundraise and engage in a type of private loan. It therefore appears that your entity is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. As such, you cannot register with us.

Date answered: 2015-05-13

PI Number: PI-6338

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

Obligation to register with FINTRAC

Question:

Please confirm my understanding that entities referred to in Paragraph 5(c) of the PCMLTFA have NOT been prescribed for the purposes of section 11.1. In other words, life companies or foreign life companies to which the Insurance Companies Act applies or life insurance companies regulated by a provincial Act are NOT required to be registered with FINTRAC in accordance with sections 11.1, 11.11 and 11.2.

Answer:

Paragraph 5(c) of the PCMLTFA refers to “life companies or foreign life companies to which the Insurance Companies Act applies or life insurance companies regulated by a provincial Act”. Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a life insurance company as “a life company or foreign life company to which the Insurance Companies Act applies or a life insurance company regulated by a provincial Act.”

Section 11.1 of the PCMLTFA states that “Except as otherwise provided in the regulations, every person or entity referred to in paragraph 5(h), those referred to in paragraph 5(l) that sell money orders to the public, and every other person or entity that is referred to in section 5 and that is prescribed must be registered with the Centre in accordance with this section and sections 11.11 to 11.2.”

That means, it is only persons and entities engaged in the business of foreign exchange dealing, of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments except for cheques payable to a named person or entity that are required to register with FINTRAC.

That said, there is a requirement for all reporting entities to enrol to be able to submit any applicable reports to FINTRAC via our online reporting tool only if 1) you are a reporting entity, and 2) you have a report to submit. You do not need to enrol for reporting purposes until you have a report to submit. When the reporting entity requires access to our reporting system, they are asked to please contact our RE Assistance Unit by phone or email.

Date answered: 2015-03-04

PI Number: PI-6291

Activity Sector(s): Life insurance, Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5c), 11.1

Changes to MSB provisions in PCMLTFA and PCMLTFR

Question:

Were there changes to the MSB legislation in the past 3 years?

Answer:

Here are some provisions from the PCMLTFA and the PCMLTFR that have been amended or added in the past 3 years. If you are interested to compare based on their previous versions, the electronic PCMLTFA and PCMLTFR provide an option to view the previous versions of the amended provisions.

From the PCMLTFA:
11.11 (1) The following persons or entities are not eligible for registration with the Centre:
(a) a listed person as defined in section 1 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism;

(b) a listed entity as defined in subsection 83.01(1) of the Criminal Code;

(c) a person or entity that has been convicted of any of the following:
(i) a money laundering offence, or an offence under the laws of a foreign country that is substantially similar to a money laundering offence,
(ii) a terrorist activity financing offence, or an offence under the laws of a foreign country that is substantially similar to a terrorist activity financing offence,
(iii) an offence under this Act or the Proceeds of Crime (money laundering) Act, chapter 26 of the Statutes of Canada, 1991 when convicted on indictment, or an offence under the laws of a foreign country that is substantially similar to an offence under either Act,
(iv) an offence under any of sections 83.18 to 83.231, 354 or 467.11 to 467.13 of the Criminal Code, or an offence under the laws of a foreign country that is substantially similar to such an offence, or
(v) a conspiracy or an attempt to commit, being an accessory after the fact in relation to, or any counselling in relation to, an offence referred to in subparagraphs (i) to (iv);

(d) a person or entity that has been convicted on indictment or convicted more than once for an offence under any of the following, or that has been convicted of an offence under the laws of a foreign country that is substantially similar to an offence under any of the following:
(i) Part X of the Criminal Code,
(ii) the Controlled Drugs and Substances Act, except for the offence under subsection 4(1) of that Act,
(iii) section 39, 44.2, 44.3, 48, 50.2 or 50.3 of the Food and Drugs Act, as that section read immediately before May 14, 1997, or
(iv) section 4, 5, 6, 19.1 or 19.2 of the Narcotic Control Act, chapter N-1 of the Revised Statutes of Canada, 1985, as that section read immediately before May 14, 1997;

(e) an entity that is a corporation in respect of which a director, the chief executive officer, the president or a person who owns or controls, directly or indirectly, 20% or more of the shares has been convicted on indictment of an offence under this Act or the Proceeds of Crime (money laundering) Act, chapter 26 of the Statutes of Canada, 1991 or has been convicted of an offence under the laws of a foreign country that is substantially similar to an offence under either Act;

(f) any prescribed person or entity.

(2) If the Centre becomes aware that a person or entity referred to in subsection (1) is registered, the Centre shall revoke the registration and shall, without delay, inform the person or entity of the revocation.

From the PCMLTFR:
59.01 Any money services business that is required to ascertain the identity of any person or confirm the existence of any entity in accordance with section 59 shall
(a) conduct ongoing monitoring of its business relationship with that person or entity; and
(b) keep a record of the measures taken and the information obtained under paragraph (a).

59.02 If, as a result of its ongoing monitoring of a business relationship under paragraph 59.01(a), the money service business considers that the risk of a money laundering offence or terrorist activity financing offence is high, it shall treat that person or entity as high risk for the purpose of subsection 9.6(3) of the Act and apply the prescribed special measures in accordance with section 71.1 of these Regulations.

Date answered: 2015-02-26

PI Number: PI-6288

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 59.01,59.02

Act: 11.11 (1),(2)

Gift cards and loyalty program - not covered

Question:

Our company is a loyalty and gift card company that offers services to clients that are franchises and corporate chains. Customers of our clients can collect points that can be used towards free products and can add money to their account in store, online or through a smartphone application.

A service our customers have requested is a managed reconciliation service where we would manage the gift card and loyalty liabilities within their franchise network. The purpose of the service is to automate the distribution of funds collected from smartphone sales.

The source of funds is an online and mobile payment processor. The funds are deposited from the payment processor into a bank account owned by our company. The funds are then paid out to franchisees using pre-authorized debits through the bank. In this case, the money is tracked on its way in through the payment processor and tracked on its way out through the bank. Our sole involvement in the process is generating a report which we send to the bank to direct which accounts to deposit the money into. We don't facilitate the actual transaction and money is only moved through pre-authorized debits to accounts which the bank has verified in advance.

Does our company need to be registered as a money services business with FINTRAC?

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that your company is a gift card company, where “Customers can collect points that can be used towards free products and can add money to their account in store, online or through a smartphone application,” and that “The funds are then paid out to franchisees using pre-authorized debits through the bank,” it appears that your entity is not, at this time, engaged in any of the activities listed above. Therefore, your entity does not appear to be an MSB as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. As such, you cannot register with us.

Date answered: 2015-02-11

PI Number: PI-6336

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5h)

MSB registration - virtual currency business model covered

Question:

Does my Bitcoin business need to be registered as a money services business (MSB) with FINTRAC?

Answer:

MSBs have the obligation to register with FINTRAC, and you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In addition, the Government of Canada has made changes to what services make an individual or an entity an MSB in Canada to include virtual currency services; however, these changes are not yet in force. Individuals and entities engaged in the business of dealing solely in virtual currency services will be MSBs, but cannot yet register with FINTRAC. Before these individuals and entities will be subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), regulations need to be written to define what it means to be engaged in the business of providing services such as dealing in virtual currency.

Based on the information you provided in your business model, namely that “funds will be exchanged at a local Bitcoin exchange and sent to a foreign Bitcoin exchange to be converted back to fiat currency”, it appears that your entity is providing fiat to fiat currency remittal services and therefore appears to be, at this time, engaged as an MSB, as per the PCMLTFA and its associated Regulations.

As an MSB in Canada, you have legal obligations under Canada's PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our website. It is important that you understand these obligations and meet them to be in full compliance with this law.

Date answered: 2014-12-10

PI Number: PI-6268

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 4, FIN 1

Regulations: 1(2)

Act: 5(h), 11.1

Establishing a real and substantial connection to Canada for MSBs

Question:

Would extra-provincial registration, without actual incorporation in Canada at the federal or provincial level, satisfy the real and substantial connection to Canada requirement?

Answer:

Extra-provincial registration would be sufficient for the purposes of establishing a real and substantial connection to Canada as long as the provincial registration requirements necessitate the carrying on of business in that province and your organization can confirm how they are carrying on business in that province.

For example, as per the Extra-Provincial Corporations Act of Ontario, a business is considered to be carrying on business in Ontario if it has a resident agent, representative, warehouse, office or place where it carries on its business in Ontario, or if it holds an interest, other than by security, in real property in Ontario, amongst other things.

Date answered: 2014-11-19

PI Number: PI-6259

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 4, FIN 1

Regulations: 1(2)

Act: 5(h), 11.1

MSB registration - Virtual currency business model covered

Question:

We would like to receive your opinion in order to determine, with respect to our services involving virtual currency, whether or not our business needs to be registered as a money services business (MSB) with FINTRAC.

Answer:

The Government of Canada has made changes to what services make an individual or an entity an MSB in Canada to include virtual currency services; however, these changes are not yet in force. Individuals and entities engaged in the business of dealing in virtual currency services will be MSBs, but cannot yet register with FINTRAC. Before these individuals and entities will be subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, regulations need to be written to define what it means to be engaged in the business of providing services such as dealing in virtual currency.

Until these regulations are drafted and in force you are an MSB, and required to register with FINTRAC, if you are engaged in the business of providing any of the following services:

  • Foreign exchange dealing (conducting transactions where you exchange one type of fiat currency for another fiat currency);
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Unless you are carrying out any of the services listed above, you cannot, at this time, be registered with us as an MSB.

That said, you reference the ability for clients to use “Bitcoin as the underlying internal transfer technology that allows users to send remittances online” and indicate that “User accounts that hold Canadian Dollars send funds through Bitcoin's payment protocol only as a method of simplified monetary movement.” This suggests that, while users are using Bitcoin to simplify monetary movement, a user could ultimately request the beneficiary of a remittance receive a fiat currency. For example, a user wishes to send funds to a relative in Venezuela, so the user sends ABC INC. an amount in Canadian Dollars and requests that the beneficiary in Venezuela receive either Canadian Dollars or Venezuela Bolivar. To remit the funds to Venezuela, ABC INC. converts the Canadian Dollars to Bitcoin to “simplify monetary movement,” but the beneficiary receives the fiat currency equivalent at the other end. Should this be the case, that is a user can request the remittance of fiat currency to another individual or entity, then ABC INC. will be considered as engaged as an MSB in Canada, with all of the associated obligations.

Date answered: 2014-10-01

PI Number: PI-6246

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 4, FIN 1

Regulations: 1(2)

Act: 5(h), 11.1

Money Services Business - using crypto-currency for exchanges

Question:

Are we considered as a Money Services Business ?

Although the company focuses on crypto-to-fiat and crypto-to-crypto transactions, one would be effectively able to achieve fiat-to-fiat conversions by combining trades. E.g. the client could be depositing $CAD in his account, convert the funds into a crypto-currency and then sell back that currency in exchange of $USD. The $USD proceeds, shall they be requested for withdrawal would effectively be the result of a $CAD to $USD currency exchange. Henceforth, the company is committed to respect the intent and essence of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act by treating those transactions as foreign exchange deals.

At this time the company doesn't allow people to transmit fiat currency to another person or entity. Payment methods used for withdrawals and deposits will be done by either checks, wires or electronic funds transfers under which the client identity is verified and matched with the client account information.

Answer:

Based on the explanation you have provided, namely that “the client could be depositing $CAD in his account, convert the funds into a crypto-currency and then sell back that currency in exchange of $USD,” we would agree that it appears that your company will be providing a foreign exchange dealing service, and will, therefore, be engaged as an MSB in Canada.

As an MSB in Canada, you have legal obligations under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act . This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Date answered: 2014-09-30

PI Number: PI-6244

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Obligations of money services businesses regarding foreign exchange transaction

Question:

What are the obligations for money services businesses in regard of foreign exchange transaction?

Answer:

Pursuant to section 5 of the PCMLTFA, persons and entities engaged in the business of foreign exchange dealing are subject to Part 1 of the PCMLTFA, and have been labelled as money services businesses (MSB). If an entity is an MSB engaged in the business of foreign exchange dealing, they have all of the obligations associated with this service, which include registering with FINTRAC as an MSB and implementing a compliance program, as well as ascertaining identification, record-keeping and reporting, as required. As such, if it be determined that the entity is conducting foreign exchange transactions, then the entity would have all of the obligations associated with this service. Because the entity should already be registered as an MSB for its remittance activities, the registration would require an update to add foreign exchange as a service provided.

Date answered: 2014-08-19

PI Number: PI-6219

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5

Determination of a real and substantial connection

Question:

When can a Money services business register with FINTRAC?

Answer:

FINTRAC has taken the position that an entity that is conducting MSB activities must have a real and substantial connection with Canada to be considered engaged as an MSB in Canada, and that having a bank account in Canada for the purpose of those MSB activities constitutes a real and substantial connection with Canada. As such, should the client be providing services to residents of Canada and subsequently obtain a bank account in Canada, they would be required to register with FINTRAC as an MSB.

Pursuant to section 11.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, except as otherwise provided in the regulations, every person or entity referred to in paragraph 5(h), those referred to in paragraph 5(l) that sell money orders to the public, and every other person or entity that is referred to in section 5 and that is prescribed must be registered with the Centre in accordance with this section and sections 11.11 to 11.2. Should an entity offering MSB activities to residents in Canada opt to create a real and substantial connection with Canada, the entity must register prior to creating said connection as it is illegal to be engaged as an MSB in Canada without having registered with FINTRAC.

Date answered: 2014-05-30

PI Number: PI-6155

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h), 11.1

Bitcoin Legislation

Question:

Just wanted to touch base regarding Bitcoin and FINTRAC registration. I am in the process of registering as an Money Services Businesses with ABC Bank and hope there is some clarification coming in the near future as to the FINTRAC regulations our company faces. To refresh your memory, we have an automated Bitcoin exchange in DEF Mall that collects government ID, biometric hand scan, phone number, and HD picture of each user of the machine. It exchanges CAD for Bitcoin and Bitcoin for CAD. My question is, are there any items we can begin working on to keep ahead of the approaching regulations that the government will be implementing

Answer:

Thank you for your interest in any potential legislative developments concerning digital currency. However, FINTRAC's mandate extends only to the administration of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations, in their current form. It is the Department of Finance Canada who has the legislative and regulatory lead for Canada's anti-money laundering and anti-terrorist financing regime and as such is responsible for any future legislative, regulatory or policy developments. You may wish to contact the Department of Finance Canada.

Date answered: 2014-03-19

PI Number: PI-6123

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Voucher company - Covered

Question:

Here is a possible scenario of how we proceed:

  1. The customer enters a store where he can purchase an ABC voucher;
  2. The customer gives the store merchant $100 CAD
  3. The store merchant provides him with a Voucher containing a PIN that is coded for $100 CAD
  4. The customer who purchase the Voucher transmits the Voucher # to a 3rd party outside of Canada
  5. The Voucher is presented at a physical store for an equivalent value of goods (food, medicine, medical).

The primary revenue stream of our company would be offering people to send small value vouchers ($1 to $25) back to their home countries that can be redeemed for basic supplies. We intend to offer this service to the purchasers free of charge. Thus allowing them to bypass the high fees of similar services. Our revenue will be earned from the redeeming store as a commission.

When the voucher is sold, the funds at that point are with the selling store merchant. On a weekly basis we will collect the funds from the selling store merchant through an EFT pull. The PIN can be redeemed immediately after issuance.

The client can make purchases for less than the value of the Voucher and PIN.

We anticipate that the majority of the Vouchers sold in Canada will be redeemed for goods denominated in a currency other than CAD. In addition, to selling our Vouchers in Canada, they will be for sale world wide. We determine the value of the voucher in the other currencies by maintaining exchange tables within our software. There will be many currency exchanges occurring because most likely the Voucher will not be redeemed in the currency that it was purchased. In addition, we will settle the merchant acquiring the Voucher in their home currency regardless of the currency we collect from the selling merchant.

We are not creating at any time our own currency. We are simply creating Vouchers that are a proxy for real currencies. That being said, we intend to allow acquiring merchants that sell virtual currencies such as Bitcoin to accept our Vouchers as payment. We have no intention of becoming a seller or buyer of virtual currencies.

Answer:

As previously indicated, to be considered a money services business in Canada, an individual or entity must be engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information provided, namely that through your company “the customer who purchase the Voucher transmits the Voucher # to a 3rd party outside of Canada” and “that the majority of the Vouchers sold in Canada will be redeemed for goods denominated in a currency other than CAD”, it appears that your entity is, at this time, engaged as a money services business in Canada, as per our Act and associated regulations.

As an Money Services Businesses in Canada, you have legal obligations under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Date answered: 2014-03-11

PI Number: PI-6118

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Cash cards company - Covered

Question:

Based on the following business model, does our company need to be registered as an Money Services Businesses with FINTRAC?

COMPANY OVERVIEW:
Company ABC with experience-derived knowledge and a proven track record encompassing 25+ years in the debit/prepaid/cash-card/e-wallet and communications field in Canada and internationally, is the continuation of its successful business model; established since 1986, where the first cash-card concept originated; with its business-to-business focus and revolutionary-disruptive technology has evolved to become a new, or optional e-Currency concept, allowing for the creation of a unique closed-loop Universal Payment System. The Company developed and owns its e-currency technology and associated intellectual property.

In January 2012, Company ABC, building off the legacy of its history, was established as a unique Independent e-Currency Network of its kind, and licensor of its business model, offering significantly greater value and opportunity (as a closed loop issuer, processor and acquirer), to neglected, underserved markets, particularly persons with no bank accounts and merchants with low, or no credit that are not accepted by credit or debit company for payment acceptance at their stores. Our system, similar to that of Interac, is 100% PIN based, therefore eliminating, or reducing the fraud possibility.

BUSINESS MODEL:

Company ABC Closed Loop cards operate within a system where the Issuer, Processor and Acquirer are the same. Think of Company ABC like a "Shopping Mall" with affiliated retailers, where its network cards can be redeemed and used to pay for goods and services, similar to an Interac Debit Card, at any location within its Mall.

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an Money Services Businesses if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Your website advises that, “Company ABC's flagship products are composed of a series of unique and innovative, cash cards (prefunded debit cards, virtual electronic accounts, e-wallets, or e-purses, as well as secured credit cards)”, and that “sending money to someone is quick and easy” by means of “a reload, or funding transaction, or a card to card transfer to the recipient's card.” The recipient can then “get his/her money by simply conducting a Cash Back / Payout transaction at an authorized establishment, or at ATMs displaying our logo.”

Based on the aforementioned, it appears that Company ABC is engaged in the activity of remitting or transmitting funds. Therefore, at this time, Company ABC is engaged as an Money Services Businesses in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

Date answered: 2014-03-06

PI Number: PI-6113

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

FX - Covered

Question:

Our company provides users with the option of conducting foreign currency exchange and does not determine the exchange rate. We are responsible for converting the funds using the Xe's rates. Do we need to register as an Money Services Businesses with FINTRAC?

Answer:

You are considered an Money Services Businesses if your business conducts foreign exchange transactions for more than $1,000 during a single transaction with the same individual or entity. For these purposes, a single transaction is defined as two or more transactions related to a foreign exchange transaction of less than $1,000 each that are made within 24 consecutive hours and that total $1,000 or more.

You have indicated that your entity provides users with the option of conducting foreign currency exchange and although your entity does not determine the exchange rate, it is responsible for, “actually converting the funds.” Based on this information, it appears that your entity is, at this time, engaged in the business of foreign exchange dealing as per our Act and associated regulations. Therefore, at this time, your company is engaged as an Money Services Businesses in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

As an Money Services Businesses in Canada, you have legal obligations under the PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Date answered: 2014-03-04

PI Number: PI-6111

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Bitcoin - Covered

Question:

Company ABC is a convenient and easy option for the small business, entrepreneur or professional to collect and receive payments directly to their bank accounts from their customers through electronic funds transfer (EFT) as an online bill payee.

Our services can only be used by businesses to receive payment for invoices.

Company ABC's clients will have to provide the following during the signup process:

  1. Full legal name of the company
  2. Business number or incorporation number
  3. Existing banking information including a banking reference
  4. Type of industry and expected monthly volumes
  5. Contact details of at least one director
  6. All companies using NoCheque need to have been in business for at least 3 years

Assuming a law firm is our client, the process will be as follows:

  1. LawCo will go to CompanyABC.com and sign-up with the information provided above.
  2. Company ABC will issue a pre-fix, let's assume 'lawco' and the law firm will add their account number to the prefix. Let's assume LawCo's internal customer number is 123456.
  3. LawCo will send an invoice to their clients and one of the payment options will be Company ABC. LawCo's client can log on to their individual bank and select Company ABC as a payee. In the account number section they will enter 'lawco123456' and make payment. Similar to a utility or bill payment.
  4. Company ABC will receive payment and transfer the funds to LawCo subject to a per transaction fee of $1.50. In addition Company ABC will provide a file that integrates with LawCo's accounting system to make account reconciliation easier.

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an Money Services Businesses if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that “Company ABC is a convenient and easy option for the small business, entrepreneur or professional to collect and receive payments directly to their bank accounts from their customers through electronic funds transfer (EFT) as an online bill payee”, it appears that your entity is, at this time, engaged as a money services business in Canada, as per our Act and associated regulations. I am providing you with a link to the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is a money services business for purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

As an Money Services Businesses in Canada, you have legal obligations under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Date answered: 2014-03-04

PI Number: PI-6110

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Payment Processing - Not covered

Question:

A federally incorporated company will partner with an overseas company which provides healthcare facilities in the Philippines. Customers living in Canada can purchase a scheme which gives access to their family members in the Philippines to accredited doctors, hospitals and other health care providers in the Philippines. Company's role is advertising and promoting the Filipino company and collecting the monthly premium on behalf of the Filipino company. The customers details are provided on line and the payment method is also chosen on line and the money is remitted by wire to the Filipino company. The Canadian company's role is limited to advertising, promoting and collecting the monthly payment for the scheme which customers purchase. The payment is a recurring payment.

My question is whether the business falls under the definition of Money Services Businesses and whether the Canadian company needs to register with FINTRAC.

Answer:

Money services businesses have the obligation to register with FINTRAC. The company is an Money Services Businesses if it is engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

The Centre has previously taken the position, and continues to uphold the position, that persons or entities engaged in the business of payment processing services that involve the “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network” are not considered to be Money Services Businessess because they are not engaged in the business of doing such remittance or transfers of funds. In other words, they don't provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of their actual service of advertising and promoting.

You have indicated, “A federally incorporated company will partner with an overseas company which provides healthcare facilities in the Philippines. Customers living in Canada can purchase a scheme which gives access to their family members in the Philippines to accredited doctors, hospitals and other health care providers in the Philippines. […] The customers details are provided on line and the payment method is also chosen on line and the money is remitted by wire to the Filipino company.” You have additionally pointed out that, “The Canadian company's role is limited to advertising, promoting and collecting the monthly payment for the scheme which customers purchase. The payment is a recurring payment.”

Based on the information you have provided, it does not appear that your client is, at this time, engaged as an Money Services Businesses in Canada as per our Act and associated regulations. Therefore, your client cannot be registered with us.

Date answered: 2014-02-20

PI Number: PI-6099

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Virtual Currency Legislation

Question:

We recently learned that the Canadian Government is planning to introduce further regulations later this year for virtual currencies, such as Bitcoin. Since our previous communication, do you have any further insight into this matter?

Will there be an online resource that we can reference to learn more about registration requirements?

Answer:

Thank you for your question about regulations regarding virtual currencies such as Bitcoin. The Department of Finance Canada is the legislative and regulatory lead for Canada's anti-money laundering and anti-terrorist financing regime and as such is responsible for any future legislative or regulatory amendments.

Date answered: 2014-02-17

PI Number: PI-6096

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Virtual Currency Exchange Not Covered - Clarifications

Question:

Our entity did not appear to be engaged as an Money Services Businesses in Canada as per the Act and associated regulations. However, I have a couple additional questions.

  1. Does this mean as long as the transaction is in CAD and is to/from Canadian Banks, it is not necessary for our organizations to report the transactions to FINTRAC i.e. even when it exceeds the transaction limit FINTRAC mentions on the website. Let's say a Canadian Virtual Currency Buyer online transfers 10,000 CAD to our company account or when our company does an online transfer of 10,000 CAD to Canadian Virtual Currency Seller?
  2. Is there any transaction limit set for domestic CAD transactions (i.e. to/from Canadian Banks as outlined above), above-which an organization carrying out such a transaction is classified as Money Services Businesses?

Answer:

To be considered an Money Services Businesses in Canada, the Money Services Businesses must be engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In response to your questions, I can provide the following guidance. While the PCMLTFA applies to businesses engaged in “remitting funds or transmitting funds by any means,” this does not apply to virtual currencies because they do not fall within the definition of “funds” under the PCMLTFR. The PCMLTFA also covers businesses engaged in “foreign exchange dealing,” however, this also does not apply to virtual currencies as they are not a national currency of any country. With this in mind, it is important to note that handling virtual currency, or defining a business as a virtual currency exchange, does not automatically make the business exempt from registering as an Money Services Businesses. The business may perform other activities, which may or may not involve virtual currency, which would make it subject to the PCMLTFA.

I strongly encourage you to review the “Guidelines” section of FINTRAC's Web site. Here you will find guidance specific to the reporting, record-keeping and identification obligations of money services businesses in Canada. In addition, Guideline 4 (Implementation of a Compliance Regime) outlines various considerations with respect to ongoing compliance training.

Date answered: 2014-02-17

PI Number: PI-6095

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1, 4, 6C

Regulations: 1(2)

Act: 5(h)

Telecom Company - Covered - Clarifications regarding financial statements

Question:

We are a telecom company. We are planning on introducing a new service to our customers that involves a slightly different form of money transfer than is currently found on the market. We would like FINTRAC's input on whether or not our planned service is an MSB, and if we need to register with FINTRAC or not.

Under this new service, our existing customers would be able to use our website to transfer using their Debit/Credit Cards funds less than, or equal to $500 per month per customer to a mobile-wallet account of the recipient. The recipient would be a mobile/GSM subscriber of a telecom operator with a mobile-wallet system anywhere in the world. An example of a mobile-wallet system would be the XYZ system used in Kenya.

The transfer of funds from our customer to the recipient would be facilitated by a clearing house. Some of the these mobile-wallet systems allow for the cashing of wallet funds, like XYZ, while others don't and are converted to customer airtime instead.

We would like to advice from FINTRAC on the following:

  • Do we need to register with FINTRAC, given that all transfers per customer per month will be under $500?
  • If we register with FINTRAC under the name our company, are we expected to have MSB and/or financial record-keeping separate from our current telecom operations?

Answer:

In response to your first question, you are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that “customers would be able to use our website to transfer using their Debit/Credit Cards funds less than, or equal to $500 per month per customer to a mobile-wallet account of the recipient” and that “some of the these mobile-wallet systems allow for the cashing of wallet funds, like XYZ, while others don't and are converted to customer airtime instead,” it appears that your entity will be engaged as a money services business in Canada, as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated regulations. The fact that the remission or transmission of funds will be less than or equal to $500.00 per month, per customer, does not impact this determination. I am providing you with a link to the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is a money services business for purposes of Part 1 of the PCMLTFA.

As an MSB in Canada, you have legal obligations under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities.

In response to your second question, it is important to differentiate between the record-keeping obligations outlined in the PCMLTFA and any requirements to keep financial statements for business accounting purposes. The PCMLTFA and its associated Regulations do not outline obligations related to a business' financial statements for accounting purposes. The record-keeping obligations outlined in the PCMTLFA and its associated Regulations are specific to records a reporting entity must keep about their clients and the transactions that these clients may carry out; transactions specific to the money services business activities.

That said, once an entity is engaged in money services business activities, all of its activities become subject to the suspicious transaction obligations of the PCMLTFA and its associated Regulations. For example, should an MSB also sell couches, the activities related to the sale of a couch would need to be considered against the suspicious transaction obligations of the PCMLTFA and its associated Regulations.

Date answered: 2014-01-24

PI Number: PI-5687

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Prepaid Bitcoin Card - Covered or not?

Question:

We intend to sell Pre-paid bitcoin cards at retail locations. Those cards have activation codes on them. The activation codes can be redeemed only on our website for credit. The user then trades the credit for Bitcoins on our website. We will not allow clients to redeem over $1000 a day. We plan on using a third party service to verify the person is who they say they are to comply with AML/KYC.

Would we be considered a Money Service Business?

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you have provided, namely that you, “intend to sell Pre-paid bitcoin cards at retail locations” and that, “those cards have activation codes on them. The activation codes can be redeemed only on our website for credit,” it appears that your entity is not, at this time, engaged as an MSB in Canada as per our Act and associated regulations. Therefore, you cannot be registered with us.

Should your business model change in the future to expand beyond offering pre-paid Bitcoin cards, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2014-01-21

PI Number: PI-5685

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Company with no connection to Canada - Not covered

Question:

Our company does not operate through an entity incorporated in Canada, is not taxable in Canada, does not have permanent employees in Canada, does not have agents in Canada, has servers located in Guatemala and the United States and does not have any bank accounts(s) in Canada for the purpose of the business.

Does our company need to be registered as an MSB with FINTRAC?

Answer:

Money services businesses (MSBs) have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

To determine if you are engaged in the money services business, I have first to determine the applicability of paragraph 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and whether you have a "real and substantial connection" with Canada. Some of the criteria we rely on to determine whether a person or entity is “engaged in the money services business in Canada" are for example: if the business is incorporated in Canada, if the business has agents in Canada, if the business has physical locations in Canada or if the business maintains a bank account or a server in Canada (among others). Unless there is a substantive connection to Canada, we do not consider the entity as conducting a money services business in Canada.

Based on the information you have provided, it appears that your entity is not, at this time, engaged as an MSB in Canada as per our Act and associated Regulations. Therefore, you cannot be registered with us.

Date answered: 2014-01-15

PI Number: PI-5682

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Payment processor

Question:

A company ("Quebec Inc.") is registered with FinTRAC as a money services business. Quebec Inc. is in the non face to face money transfer business. Quebec Inc. transfers payments from individuals or companies in amounts that are over $1000. These payments are for the transmission of commercial or residential rents, condo fees, or other amounts relating to tenants paying their landlords or condo syndicate. Quebec Inc. has done full due diligence on the landlords but has no information on the tenants making the payments. However, all tenants will be making such payments with a credit card issued by a recognized Canadian financial institution and NOT prepaid cards. Can Quebec Inc. rely on the client identification performed by the card issuer of the credit card and be exempted from performing the ID requirement as mandated for by FinTRAC for transfers of over $1000?

In this scenario, what happens if instead of processing payments for rent or condo fees, Quebec Inc. processes tuition fees for universities or high schools, would Quebec Inc. be exempt from the requirement of ID'ing the client?

Answer:

You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In the scenario you have provided, Quebec Inc., an MSB registered with FINTRAC, “transfers payments from individuals or companies in amounts that are over $1000.” You have additionally indicated that, “these payments are for the transmission of commercial or residential rents, condo fees, or other amounts relating to tenants paying their landlords or condo syndicate.” In a follow-up email, you have also asked whether Quebec Inc. would be exempt from identification obligations if it was processing tuition fees for universities or high schools. Based on the information you have provided, namely that Quebec Inc. is transferring payments for rent/ condo fees and other tenant payments, and the fact this seems to be Quebec Inc.'s sole activity, it appears that Quebec Inc is carrying out payment processing activities, the transfer of funds only being a corollary of this service.

The Centre has previously taken the position, and continues to uphold the position, that persons or entities engaged in the business of utility payment, payroll and commission services, and payment services that involve the, “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network,” are not considered to be MSBs as they are not engaged in the business of remitting or transferring funds. In other words, they do not provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of their actual service of processing these payments. Based on the foregoing, it does not appear that Quebec Inc. is, at this time, engaged as an MSB in Canada as per our Act and associated Regulations. Therefore, this entity cannot be registered with us and as a result, is not be subject to the identification obligations of the PCMLTFA and its associated Regulations.

Should Quebec Inc.'s business model change in the future to expand beyond offering payment processing services between tenants and landlords, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2014-01-13

PI Number: PI-5679

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Closed-loop prepaid access cards - Covered or not?

Question:

We would appreciate receiving guidance from FINTRAC regarding its interpretation of the MSB rules under the PCMLTFA and their application to closed-loop prepaid access cards. Under the prepaid access rules promulgated in the United States by FinCEN, the following activity is not deemed to be part of a prepaid access program, and businesses engaged in this activity would not be subject to registration as a "money services business" with FinCEN:

  • If the prepaid access device (e.g., prepaid gift cards) are issued as part of a "closed loop prepaid" access program, i.e., the funds may only be used for goods and services involving a defined merchant or location, such as a specific retailer or chain (31 CFR§1010.100(kkk)) and
  • If the gift card provides closed loop access to funds not exceeding US$2,000 on any day (31 CFR§1010.100(kkk))

FinCEN has concluded that closed loop prepaid access cards which have these features present a very limited risk of AML or financial abuse.

As we have not seen the closed-loop prepaid card question specifically addressed in FINTRAC's 2010 report on Money Laundering and Terrorist Financing (ML/TF) Typologies and Trends for Canadian Money Services Businesses (MSBs) or the Guidelines on MSBs, we would be grateful if you could point us to any additional guidance on this question or exchange with us further on this.

Answer:

Money services businesses in Canada are subject to the PCMLTFA and its associated Regulations. In Canada, an entity is an MSB if it is engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Once an entity is engaged in money services business activities, all of its activities become subject to the suspicious transaction obligations of the PCMLTFA and its associated Regulations. For example, should an MSB also sell couches, the activities related to the sale of these couches would need to be considered against the suspicious transaction obligations of the PCMLTFA and its associated Regulations.

To solely provide closed-loop prepaid access cards does not make an entity an MSB, therefore, the entity would not be subject to the PCMLTFA and its associated Regulations. However, should an entity be engaged in MSB activities, and add to these the provision of closed-loop prepaid access cards, then this prepaid card activity would be subject to the suspicious transaction requirements of the PCMLTFA and its associated Regulations.

For information on some of the considerations and risks associated with prepaid access card activities, you may wish to refer to FINTRAC's Typologies and Trends Reports – July 2010 – Money Laundering and Terrorist Financing (ML/TF) Typologies and Trends for Canadian Money Services Businesses (MSBs) and Money Laundering and Terrorist Financing Typologies and Trends in Canadian Banking, both available in the “General publications” section of the FINTRAC website.

Date answered: 2014-01-07

PI Number: PI-5677

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Bitcoin Company (Alberta) - Not covered

Question:

Does the company ABC (Alberta) need to be registered as an MSB with FINTRAC?

Consumers can buy and sell Bitcoins using ATMs that Company ABC has solely for this purpose. For the consumer to sell Bitcoins to Company ABC, a consumer will scan a digital wallet and specify the amount being sold to the ATM. The ATM will then calculate the market price of Bitcoin and subtract the transaction fee (a pre-set percentage) from the total amount to be received in fiat. The Bitcoins purchased from the consumer will then be transferred to Company ABC's online exchange account and an amount in Canadian dollars will be dispensed to the consumer. For a consumer to purchase Bitcoins from Company ABC, the business' inventory of current Bitcoins will be used. The consumer will be charged an amount in Canadian dollars, plus a transaction fee (a pre-set percentage) to receive Bitcoins to the consumer's digital wallet.

Answer:

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the summary of Company ABC, it appears that your entity is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations.

Therefore, you do not have to register your entity with us.

Should your business model change in the future to expand beyond offering services such as buying and selling virtual currency, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2013-12-23

PI Number: PI-5672

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1, 6C

Regulations: 1(2)

Act: 5(h)

EFTs within Canada - Covered

Question:

We would like to establish an online business of transferring funds from one individual or organization to another and all transactions are taking place online. Individuals or organizations send money using our platform, and all transactions will be within Canada.

Do we need to be registered as an MSB with FINTRAC?

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you have provided, it appears that your entity is, at this time, engaged as an MSB in Canada as per our Act and associated regulations. Subsection 28(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states:

  • 28. (1) Subject to subsection 52(1), every money services business shall report the following transactions and information to the Centre:

(a) the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from a financial entity or a public body;
(b) the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and
(c) the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be.

That being said, subsection 28(2) of the PCMLTFR goes on to specify that, “paragraph (1)(b) does not apply when the money services business sends an electronic funds transfer to a person or an entity in Canada, even if the final recipient is outside Canada.” Given the fact you are engaged in transmitting funds but are only doing so within Canada, you do not need to report these transactions. However, as an MSB in Canada, you do have legal obligations under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This includes registering your business with FINTRAC, reporting any large cash transaction of $10,000 or more you receive and record keeping obligations in regards to that transaction. You must also report any suspicious transactions, as well as terrorist property reports. You have a number of other record keeping obligations, ascertaining identity in certain situations, performing Politically Exposed Foreign Person determination(s), third party determination(s), and finally, you must also implement a compliance regime.

Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Date answered: 2013-12-13

PI Number: PI-5661

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1, 6C

Regulations: 28(1), 28(2)

Act: 5(h)

Payment Processing - Covered or not?

Question:

Our company's clients are rental property owners; our normal business is to collect cheques from their tenants, deposit the cheques to their bank accounts, and charge a fixed service fee.

One of our clients who is currently not in Canada just enquired whether she can wire a certain amount of Canadian dollars (approx. $25,000) to our bank account as she purchased a property that is approaching the closing day. The lawyer requested certified cheque or money order; however, as the client is not in Canada now, she cannot do the certified cheque or money order herself. Therefore, she wants to wire the money needed to our bank account, then we can get a certified cheque or money order from our bank and submit it to the lawyer for her. We will charge a service fee, if this transaction proceeds.

This ONE transaction is NOT within our normal business area, but whether this ONE transaction would make our company a "money service business" so that we must register with the government?

Answer:

To be considered a Money Services Business (MSB), an individual or entity must be engaged in the business of any of the following activities in Canada:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you have provided, it does not appear that your entity is, at this time, engaged as an MSB in Canada as per the PCMLTFA and its associated Regulations. In fact, your business doesn't provide the services of remitting and/or transferring funds for the sake of the service. This transfer of funds is simply a corollary of your actual service of collecting and depositing rental cheques on behalf of your clients. Therefore, you cannot be registered with us and are thus not required to report the above-mentioned activity.

Should your business model change in the future to expand beyond offering these services, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2013-11-27

PI Number: PI-5649

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Mobile App Change Card - Not Covered

Question:

We are a small Canadian company developing innovative mobile payment solutions.

Our product is a mobile App which serves as anonymous change card/ merchant loyalty card except for being on a phone. Any consumer anywhere in the world would be free to download and use our mobile App which will be posted on Google's Play market and Apple's iTunes App store. Our company does not directly deal with a consumer's funds and there is only one way a user can "load funds" onto his or her Mobile App, which is to tender an amount greater than the value of goods or services being then consumed.

We would like to receive advice and guidance from FinTrac to insure that our product when ready for commercial deployment will comply with all existing and pending regulations.

Is there a process whereby we can make confidential submissions to FinTrac to disclose in detail what we are doing and receive comment from you on potential pitfalls or areas of concern?

Answer:

Based on the information you have provided, it does not appear that your entity is, at this time, engaged as an MSB in Canada as per our Act and its associated Regulations. It seems that your entity provides a platform allowing consumers to store change via a mobile app which they can then use to make purchases with select merchants. As such, you cannot register your entity with us.

Should your business model change in the future to expand beyond offering this platform, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2013-11-14

PI Number: PI-5646

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Financial Statements required?

Question:

Are money service businesses (MSBs) required to provide financial statements once they registered with FINTRAC?

Answer:

There is nothing in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act nor its regulations that require an MSB to submit financial statements to FINTRAC.

Date answered: 2013-11-08

PI Number: PI-5644

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Vault Storage of Valuables

Question:

Since March 2012 our corporation had developed an additional channel of business – vault storage of valuables for our clients.

The question relates to the following transaction which we were requested to execute: The customer requested us to store his cash (amount of up to $20,000). And the procedure which was requested is that the customer will wire-transfer the money to our bank account, while our company will withdraw the transferred amount and will store it in a physical storage on our premises.

Should we report such transaction to FINTRAC?

Answer:

To be considered a money services business (MSB), an individual or entity must be engaged in the business of any of the following activities in Canada:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that, “The customer requested us to store his cash (amount of up to $20,000). And the procedure which was requested is that the customer will wire-transfer the money to our bank account, while your company will withdraw the transferred amount and will store it in a physical storage on our premises,” it does not appear that your entity is, at this time, engaged as an MSB in Canada as per the PCMLTFA and its associated Regulations. In fact, your business doesn't provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds (via wire) is simply a corollary of the actual service of financial storage. Therefore, you cannot be registered with us and are thus not required to report the above-mentioned activity.

Date answered: 2013-09-27

PI Number: PI-5620

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Entities engaged in the business of Payment Processing Services

Question:

We would like to know if our business needs to be registered as a Money Services Business (MSB) with FINTRAC?

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

The information you provided indicates that, “Advertisers create campaigns,” and, “ Company ABC sets a price for that campaign.” You further specify that, “money is transferred from Advertisers to Company ABC's accounts. As consumers view and interact with ads they are paid and their accounts accumulate cash. Which they can use to purchase products online. […] Once those purchases are complete, Online vendors can then take the money out of the system with a transfer to funds from our Company ABC account to their bank accounts.” Company ABC also facilitates that transfer of funds from the Advertiser's/ Vendor's account to a consumer's account when a product is purchased. The documentation provided states that, “All purchases are through the Company ABC Transaction Server and only with vendors that have uploaded and integrated our Transaction Server.” Based on the information you have provided, namely that Company ABC operates a platform between consumers and advertisers/ vendors and facilitates the transfer of funds between these parties when ads are viewed and/ or featured products are purchased, it appears that Company ABC is carrying out payment processing activities, the transfer of funds only being a corollary of this service.

The Centre has previously taken the position, and continues to uphold the position, that persons or entities engaged in the business of payment processing services that involve the “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network” are not considered to be MSBs because they are not engaged in the business of doing such remittance or transfers of funds. In other words, they don't provide the services of remitting and/or transferring funds for the sake of the service; the transfer of funds is simply a corollary of their actual service. Given the foregoing, it does not appear that Company ABC is, at this time, engaged as an MSB in Canada as per our Act and associated regulations. Therefore, your entity cannot be registered with us.

Should your business model change in the future to expand beyond offering payment processing services between consumers and advertisers/ vendors, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2013-08-27

PI Number: PI-5603

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Bitcoin Exchange - Not Covered

Question:

Company ABC provides real time purchasing of small amounts of crypto-currency using an INTERAC debit card. It also facilitates online checkouts where merchants accept Bitcoin while consumers hold debit card balances. Company ABC offers a familiar checkout experience for consumers.

Does Company ABC need to register as an MSB?

Answer:

To be considered a Money Services Business (MSB), an individual or entity must be engaged in the business of any of the following activities in Canada:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Strictly based on the information you have provided, namely that, “Company ABC provides real time purchasing of small amounts of crypto-currency using an INTERAC debit card,” and that it, “facilitates online checkouts where merchants accept Bitcoin while consumers hold debit card balances,” it does not appear that your business is engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. Therefore, you cannot register your entity with us. Should your business model change in the future to expand beyond selling crypto currency and facilitating online purchases using Bitcoin, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2013-08-22

PI Number: PI-5601

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Bitcoin Exchange - Covered

Question:

I am seeking advice about launching a regulated Bitcoin Exchange business in Canada.

A recent article suggested that while FinTRAC does not consider Bitcoins to be funds, conducting a transaction:

  1. between two fiat currencies with Bitcoin as an intermediate step; or
  2. between Bitcoin and non-Canadian fiat currency

would be counted as foreign exchange and therefore require a Bitcoin Exchange to be regulated.

Would you be able to confirm whether this interpretation is correct and could you confirm which regulatory body within Canada would be responsible for regulating such an Exchange?

Answer:

To be considered a money services business, an individual or entity must be engaged in the business of any of the following activities in Canada:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

It appears that your company will be offering its clients “Bitcoin/ fiat currency transactions”. Your documentation explains how an Exchange user could perform this type of transaction in the following example:

  1. Log into Exchange account and selects add CAD100 credit
  2. Transfers CAD100 from personal bank account into Exchange's bank account, quoting one-off payment reference
  3. Buys CAD100 of BTC from the Exchange at a quoted rate based on the Exchange's bid/ ask spread
  4. Uses BTC balance to buy GBP from the Exchange at a quoted rate based on the Exchange's bid/ ask spread
  5. Withdraws GBP from the Exchange to personal GBP bank account

Your documentation also indicates that, “Even where users think they are making a straight conversion from, for instance, CAD to GBP, the actual Back-office transaction will include Bitcoin as a mid-way currency […],” and that, “The Exchange will hold bank accounts with a major bank in each jurisdiction in whose currency we trade – e.g. CAD bank account in Canada & GBP bank in the UK.”

Based on the above information, it appears that your entity will be engaged in foreign exchange dealing and as such, will be a money services business in Canada as per our Act and its associated Regulations.

Date answered: 2013-08-19

PI Number: PI-5598

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Foreign MSB

Question:

I wanted to confirm a view regarding a non-Canadian money services business that sends funds into Canada to a Canadian recipient.

I understood from my earlier communications with FINTRAC that, provided the non-Canadian MSB does not have a presence in Canada nor employees or agents in Canada, the non-Canadian MSB would not have to be registered with FINTRAC with respect to money transmissions into Canada to Canadians. Is this still correct?

Answer:

To determine whether an MSB is engaged in money services business in Canada, we must determine the applicability of paragraph 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in addition to whether the entity has a "real and substantial connection" with Canada.

Criteria relevant to this determination may include whether the business is incorporated in Canada, whether the business has agents in Canada, whether the business has physical locations in Canada and/ or whether the business maintains a bank account or a server in Canada. In that vein, a Canadian bank account for the purposes of carrying on MSB activities is considered to be a “real and substantial connection to Canada”. Although an MSB may not have a physical presence in Canada, having a bank account in Canada for the purposes of remitting funds to a Canadian beneficiary ultimately means that the entity has a real and substantial connection to Canada and is subject to the legal obligations under the PCMLTFA and its associated regulations. This includes registering the entity with us, reporting to us, keeping records, identifying its clients, and having a compliance regime.

Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of these obligations and responsibilities. All of these are described in greater detail on our Web site.

Date answered: 2013-08-15

PI Number: PI-5594

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Transmitting funds on behalf of an MSB

Question:

I have a client who operates an MSB, a remittance service, in both Canada and the United States. Client use the service to send money to family overseas. This client finds it expensive and time-consuming to maintain correspondent banking relationships around the world for both the Canadian and US entities. They would find it much more efficient if the Canadian entity could perform the "back office" operations on behalf of the U.S. entity.

Effectively, the U.S. entity would accept the funds to be remitted, and perform all the client identification and recordkeeping procedures required under the U.S. legislation. The U.S. entity would also file STRs, and meet all of the other requirements under U.S. legislation. However, the U.S. entity would contract with the Canadian entity to have the Canadian entity remit the funds to the recipient on behalf of, and in satisfaction of the obligations of, the U.S. entity.

Since the Canadian entity already has a network of correspondent banks, the process would eliminate the need for the U.S. entity to maintain its own separate network of correspondent banks.

I cannot find anything the PCMLTFA which would prohibit the arrangement described above, and furthermore, I cannot find anything that prevents a Canadian MSB from acting as a service provider to a foreign MSB. Also, I do not believe that the provision of such back office services is activity which is regulated under PCMLTFA.

The question is: Is transmitting funds on behalf of a related MSB permitted?

Answer:

If the U.S. entity “contracts with the Canadian entity to have the Canadian entity remit the funds to the recipient on behalf of, and in satisfaction of the obligations of, the U.S. entity,” you are correct in stating, in this particular scenario, that the Canadian MSB is “not engaged in the business of doing such remittance or transfers of funds and only the US MSB is so engaged.” You are also correct in stating that nothing prevents a Canadian MSB from providing these services on behalf of the foreign MSB.

However, in this scenario, it appears that the Canadian MSB is acting as an agent, rather than a service provider, of the U.S. MSB for the purpose of remitting and transmitting funds. Foreign entities carrying out MSB activities in Canada through agents or branches are required, as per Section 11.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), to register with FINTRAC as MSBs and list, as per subsection 11.12(1) of the PCMLTFA, their agents and branches accordingly.

Despite the fact that the Canadian MSB is an MSB itself, in this scenario, it is acting as an agent of the U.S. MSB and needs to be listed this way in the U.S. MSB's registration.

Date answered: 2013-08-09

PI Number: PI-5593

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 11.1, 11.12(1), 5(h)

Company that does the processing for charities - Not covered

Question:

We would like to know if our business needs to be registered as a Money Services Business (MSB) with FINTRAC?

Answer:

An entity is considered an MSB under subsection 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) if it is engaged in foreign exchange dealing, remitting or transmitting funds by any means or through any person, entity, or electronic funds transfer network or issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments except for cheques payable to a named person or entity. This subsection of the PCMLFTA specifically excludes cheques made payable to a named person or entity.

Based on the information you have provided, namely, that your company does the processing of cheques for charities and “receives the checks here in Canada thru the office in Israel, deposit them in our account (no third party cheques), once funds have cleared, we send the funds back to the office in Israel,” it does not appear that your entity is, at this time, engaged as an MSB in Canada as per the PCMLTFA and associated regulations. Therefore, you cannot register with us.

Should your business model change in the future to expand beyond processing cheques made payable to a specific person or entity, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2013-08-01

PI Number: PI-5591

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Company that offers voucher services - Covered

Question:

Company ABC will offer voucher services to our customers which is expected to be mainly the immigrant communities.

Company ABC will first move a large batch of money through the Banks to take advantage of good FX rates and low fees for large amounts of transfer. For example $50,000 FJD. The actual international money transfer occurs with this transaction.

Then smaller amount of voucher for specific retailers in Fiji will be sold from this batch to customers in Canada L1036 for example vouchers of $20 FJD or $50 FJD for the use by beneficiaries in Fiji at a particular store.

When a customer in Canada buys a voucher of $50 FJD, the Canadian customer will pay Company ABC in Canada in Canadian dollars a sum of say $35 CAD. The instant this sum is confirmed paid to Company ABC in its Canadian Bank Account, a value of $50 FJD will be reserved in the batch in Fiji towards this voucher.

The beneficiary of the voucher will then go to the selected retailer for the voucher and be able to take $50 of goods or services offered by the retailer.

This way the sender is able to control what their money is used for by the beneficiary. Schools, Doctors, Pharmacy, Utilities will some examples of suppliers that a sender can choose.

The high cost of remittance for small amounts will be reduced due to the additional revenue derived as commission from the retailer for the sale of the voucher. Thus allowing Company ABC to reduce the cost of remittance for small amounts to the customer in Canada.

When the money collected in Canada builds up to a big amount, then again this batch of money will be transferred to Fiji or Samoa as the next batch.

Voucher types will be retail vouchers or money voucher or charity vouchers.

Retail voucher is where a beneficiary can only receive the goods or services offered by the retailer chosen by the sender.
Money voucher is where the sender intends to give cash to the beneficiary and thus selects a money voucher.
Charity voucher is where charity organizations can receive donations from their supporters. Company ABC intends to not charge fees for this service to the charity organizations.

Therefore, does Company ABC need to be registered as a Money Services Business (MSB) with FINTRAC?

Answer:

You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity, or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

You have indicated that Company ABC “will offer voucher services” that will include different types of vouchers, namely, retail vouchers, money vouchers, and charity vouchers.

Based solely on the information you have provided, namely that your business will be offering money voucher services, whereby “the sender intends to give cash to the beneficiary and thus selects a money voucher,” it appears that Company ABC is engaged in the activity of remitting or transmitting funds. Therefore, at this time, Company ABC is engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

As an MSB in Canada, you have legal obligations under the PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Date answered: 2013-07-26

PI Number: PI-5584

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Digital Cash Platform - Covered or not

Question:

Background
We have developed a digital cash payments platform. Our solution is a legitimate payments business that aspires to reduce the number of cash transactions by offering retailers a cheaper, faster, more secure alternative. Our digital cash platform mints high-encrypted single use digital coins that can be validated and settled in real time. We are working with some of the best cryptographers globally, to build a cheaper, more secure payments platform.

Since we are a legitimate business that has every intention of complying with all regulation, we thought we should err on the side of caution, by discussing our intention to do a trial in advance.

Digital Cash
Has all the benefits of cash - intrinsic value, no recourse, immediate settlement and anonymity, but all of the advantages of an electronic payment - ability to transact remotely, a transaction record and security.

Our Platform
We are currently focused in the Canadian marketplace, although believe that once successful in Canada there are many opportunities to expand abroad. Our clients could be any merchant, either bricks & mortar or on-line. Our solution will start with P2B payments, but will expand to P2P, B2B and P2C payments. (P=Person, B=Business, C=Charity).

We are effectively building a cloud based software only closed loop payments platform that will extend across many merchants. In the medium term, we will open up the environment to allow additional mints/validator (Issuers/Acquirers). In the long term we will make the platform multi-currency including rewards, coupons and marketing.

We would like to know if we have to register with FINTRAC as an MSB.

Answer:

To be considered a Money Services Business (MSB), an individual or entity must be engaged in the business of any of the following activities in Canada:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

If your entity is remitting and/or transmitting funds of merchants and/or consumers for the purpose of carrying out “electronic payments,” or more specifically, “P2B payments” or person to business payments, it would seem that your entity is, at this time, engaged as an MSB in Canada as per our Act and its associated Regulations. If your entity is engaged in this activity, you will need to register your entity with us.

I am providing you with a link to the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is an MSB for purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

As an MSB in Canada, you have legal obligations under Canada's PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our website. It is important that you understand these obligations and meet them to be in full compliance with this law.

Date answered: 2013-07-16

PI Number: PI-5573

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

MSB Bitcoin - Not Covered

Question:

Can you confirm that a Bitcoin exchange that transfers funds as a corollary of its actual service of buying and selling virtual currency does not provide the services of remitting and/or transferring funds for the sake of the service, and therefore is not required to register with FINTRAC as a money services business?

Answer:

Money services businesses have the obligation to register with FINTRAC. To be considered as an MSB in Canada, the entity must be engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

The trade of digital tokens, including Bitcoins, is not recognized under the PCMLTFA as one of the three MSB activities listed above. While the remitting or transmitting of funds is an MSB activity, in this specific scenario, the remitting or transmitting of funds that occurs is incidental and only happens as the business carries out its core activity of trading digital tokens. The remitting and transmitting of funds is the method used by this business to provide its service of trading digital tokens.

In addition, handling Bitcoins, or defining a business as a Bitcoin Exchange, does not automatically make the business exempt from registering as an MSB. The business may perform other activities, which may or may not involve Bitcoins, which would make it subject to the PCMLTFA.

While the PCMLTFA applies to businesses engaged in “foreign exchange dealing,” this does not apply to Bitcoin as it is not a national currency of any country.

Date answered: 2013-06-04

PI Number: PI-5561

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

MSB Bitcoin - Not Covered

Question:

Company ABC is a coin processor. We receive coins in large volumes from various entities including municipalities, transit, vending, parking and charities. Coins are processed at our facility and packaged into rolls and boxes and deposited with armoured car service providers who in turn credit our bank accounts for the deposits. Our customers are paid for the coins via cheque, bank deposit or wire. Does Company ABC need to be registered as a Money Services Business (MSB) with FINTRAC?

Answer:

Money services businesses have the obligation to register with FINTRAC. To be considered as an MSB in Canada, the entity must be engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that “We receive coins in large volumes from various entities including municipalities, transit, vending, parking and charities. Coins are processed at our facility and packaged into rolls and boxes and deposited with armoured car service providers who in turn credit our bank accounts for the deposits. Our customers are paid for the coins via cheque, bank deposit or wire”, it appears that your entity is not, at this time, engaged as a money services business in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated regulations. Therefore, you do not have to register your entity with us.

In fact, the processing of coins is not recognized under the PCMLTFA as one of the three MSB activities listed above. While the remitting or transmitting of funds is an MSB activity, in this specific scenario, the remitting or transmitting of funds that occurs is incidental and only happens as the business carries out its core activity of processing coins. The remitting and transmitting of funds is the method used by your business to provide its service of processing coins.

Date answered: 2013-06-04

PI Number: PI-5560

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Company selling Bitcoins - Needs to register as a MSB or not?

Question:

Are Bitcoin exchanges considered MSBs under the PCMLTFA?

Answer:

It is a question of fact to be able to determine if an entity needs to be registered as a Money Services Business (MSB) with FINTRAC.

It would be easier to respond to this question after reviewing the business model of the entity you are referring to.

However, here are some comments:

MSBs have the obligation to register with FINTRAC. MSBs must be engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

At this time, if the entity buys and sells Bitcoins directly from customers, it appears that this entity is not engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. In fact, this kind of entity doesn't provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of their actual service of buying and selling virtual currency.

If this is the only service offered by this entity, it does not have to register with us.

Date answered: 2013-05-16

PI Number: PI-5554

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Virtual Currency

Question:

Does Company ABC, that purchases virtual currency such as bitcoins, litecoins, facebook credits, world of warcraft coins at bulk discount rates and sells it at physical locations across the country as well as online through cash deposits in banks needs to be registered as a Money Services Business (MSB) with FINTRAC?

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that “Company ABC purchases virtual currency such as bitcoins, litecoins, facebook credits, world of warcraft coins at bulk discount rates and sells it at physical locations across the country as well as online through cash deposits in banks. In our physical stores we will collect the money from buyers first before sending them the virtual credits”, it appears that your entity is not, at this time, engaged as a money services business in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing and its associated Regulations. In fact, your entity doesn't provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of your actual service of buying and selling virtual currency. Therefore, you do not have to register your entity with us.

Date answered: 2013-05-09

PI Number: PI-5551

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

MSB Bitcoin - Not Covered

Question:

  1. Buy and Sell Bitcoins directly from customers.
  • Offer Bitcoins at a fixed rate
  • All sales and purchases are directly with the company
  1. Bitcoin payment provider
  • Create software for business to accept Bitcoin payments and either keep Bitcoins or automatically convert to CAD
  • In this situation a customer would go to the digital or physical store and pay the merchant with Bitcoins ? from any number of Bitcoin services
  • The merchant would have an agreement with to automatically sell those Bitcoins to the company at the posted rate and receive CAD ? alternatively they can keep the Bitcoins
  1. Start an exchange
  • Create an order book where people can put in an order at x price and hope it gets filled.
  • In this case the users are buying and selling from each other with the facilitation of the exchange which takes a fee.

Answer:

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that your entity “Buy and Sell Bitcoins directly from customers”, it appears that your entity is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. In fact, your entity doesn't provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of your actual service of buying and selling virtual currency. Also, the creation of a “software for business to accept Bitcoin payments and either keep Bitcoins or automatically convert to CAD” and an “order book where people can put in an order at x price and hope it gets filled” does not make your entity, at this time, engaged as an MSB in Canada since your entity provides a platform allowing businesses to accept or trade virtual currency.

Therefore, you do not have to register your entity with us.

Date answered: 2013-05-09

PI Number: PI-5550

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

MSB - Not Covered

Question:

Our business is engaged in the trade of digital tokens, particularly Bitcoin and Litecoin. A summary our current business model is as follows:

  • We work with suppliers of these digital goods who wish to sell them online. They send us their tokens and we in turn sell them to our customers. After selling, we then pay these suppliers a commission of the sales for their goods. These commissions are paid through direct deposit or wire transfer.
  • Customers fund their accounts with us and purchase the goods for sale on our platform. Payments are sent to us electronically.
  • For large purchases (over $2,000/day), we require photo identification and proof of address as a measure against fraud.
  • Our future implementation is looking to also accept cash in physical locations. However, we are unsure whether doing so would require us to take extra steps to become an MSB, or implement other anti-money laundering procedures.

We are hoping to clarify whether or not our business is considered an MSB.

Answer:

Money services businesses (MSBs) have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that your “business is engaged in the trade of digital tokens, particularly Bitcoin and Litecoin”, it appears that your entity is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. In fact, your business doesn't provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of your actual service of trading virtual currency. Therefore, you do not have to register your entity with us.

Date answered: 2013-05-09

PI Number: PI-5549

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Issue and Redeem Negotiable Instruments: Bank drafts

Question:

Putting cheques and bank drafts into the context of our legislation, since cheques made payable to a named individual are specifically excluded, am I correct to assume bank drafts made payable to a named individual are also not covered?

Answer:

No, bank drafts made payable to a named individual are covered as similar negotiable instruments. According to the definition provided in the Cross-border Currency and Monetary Instruments Reporting Regulations in Section 1(1), negotiable instruments include “bank drafts, cheques, promissory notes, travellers' cheques and money orders, other than warehouse receipts or bills of lading.”

Subsection 5(h) of the PCMLTFA states “issuing and redeeming money orders, traveller's cheques or other similar negotiable instruments except for cheques payable to a named person or entity.” This subsection of the Act specifically excludes cheques made payable to a named person or entity, while bank drafts, which are not the same as cheques made payable to a named person or entity, are not excluded, so are considered to be similar negotiable instruments which can be issued and redeemed.

As indicated in our previous discussions re: issuing/redeeming, the issuer is the entity that makes available it's business' money orders, traveller's cheques or negotiable instruments, so would be the financial institution in the case of cheques or a chequebook. In the context of the PCMLTFA, redeeming means for the issuing entity to repurchase the negotiable instrument by returning the purchase price to the buyer and/or removing the negotiable instrument from the market. And, to accept the negotiable instruments of an issuer and return the cash equivalent to the client is considered to be cashing not redeeming.

Date answered: 2013-04-02

PI Number: PI-5527

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Company that provide service under a "white label" - Covered or not?

Question:

We have been approached by an online selling community, where people within this community post goods for sale. This community does not want their customers to see an ABC Financial brand of online payment service. But they asked if we could provide our services under a "white label" .. which means their customers see their name and logo everywhere our name and logo appear on our payment service website.

I am not sure if this is possible in terms of FINTRAC rules, and that is why I wanted to ask the question. Perhaps the question has been asked already and you have the answer from prior experience.

Answer:

Based solely on the information you provided, it appears your business is carrying out MSB activities behind the scenes for another company. As a result, ABC Financial is required to fulfill the necessary obligations, resulting from these additional activities, under the PCMLTFA.

Date answered: 2013-04-02

PI Number: PI-5526

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1, 6C

Regulations: 1(2)

Act: 5(h)

Charitable Organization in Canada - Covered or not?

Question:

Does a charitable organization in Canada need to be registered as a Money Services Business?

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based solely on the information you provided, namely that this organization allows for the transfer of funds to designated “Canadian and American or internationally based charitable or non-governmental organizations” by Canadian and American donors, it appears that this organization is in the business of facilitating international donations. Although funds are moved between Canada and the US through the organization's “International development Fund / Exchange Fund arrangement at the direction of the donors in both countries,” remitting or transmitting of funds is a corollary service of the organization's activities of facilitating international donations.

Therefore, at this time, it appears the organization is not engaged in the business of remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network. As such, the registered charitable organization in Canada is not required to register as a Money Services Business.

Date answered: 2013-04-02

PI Number: PI-5525

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Factoring Company - Covered or not?

Question:

I am contacting FINTRAC on behalf of 123, a factoring company with a subsidiaries located in Toronto and Montreal. I am trying to find out what the regulatory requirements are for a factoring company to stay in compliance with anti money laundering laws. Please note that we are not a bank nor regulated like a bank. I am not sure if we qualify as a money services business or not. I appreciate any information or resources you can provide.

Answer:

For an entity to be a reporting entity subject to the PCMLTFA, it must fall within one of the categories of reporting entities outlined in section 5 of the Act. ‘Factoring entities' do not fit into any of these categories to classify them as persons or entities subject to the PCMLTFA.

Based on the information you provided, namely that your business provides “accounts receivable financing (factoring)” services, it appears that your entity is not, at this time, subject to our Act and its associated Regulations.

Date answered: 2013-03-08

PI Number: PI-5518

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5

Issuing/Redeeming negotiable instruments vs cashing

Question:

MSBs issuing/redeeming traveller's cheques and money orders. Does the same logic apply in cases where MSBs issue or redeem bank drafts? That is to say that the issuer/redeemer is not the MSB but rather the bank on which said drafts are drawn?

Answer:

Bank drafts made payable to a named individual are covered as similar negotiable instruments. According to the definition provided in the Cross-border Currency and Monetary Instruments Reporting Regulations in Section 1(1), negotiable instruments include “bank drafts, cheques, promissory notes, travellers' cheques and money orders, other than warehouse receipts or bills of lading.” Subsection 5(h) of the PCMLTFA states “issuing and redeeming money orders, traveller's cheques or other similar negotiable instruments except for cheques payable to a named person or entity.” This subsection of the Act specifically excludes cheques made payable to a named person or entity, while bank drafts, which are not the same as cheques made payable to a named person or entity, are not excluded, so are considered to be similar negotiable instruments which can be issued and redeemed.

The issuer is the entity that makes available its business' money orders, traveller's cheques or negotiable instruments, so would be the financial institution in the case of cheques or a chequebook. In the context of the PCMLTFA, redeeming means for the issuing entity to repurchase the negotiable instrument by returning the purchase price to the buyer and/or removing the negotiable instrument from the market. And, to accept the negotiable instruments of an issuer and return the cash equivalent to the client is considered to be cashing not redeeming.

Date answered: 2013-02-04

PI Number: PI-5491

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Regulations: 1(1)

Act: 5(h)

EFTs - Covered or not?

Question:

Here are two business scenarios. I would like a determination as to whether we would need to be registered as an MSB with FINTRAC.

  1. The more general scenario is the “MSB type of business” whereby the entity in question is in the business of providing online payment services as an intermediary for its customers (which are other online businesses … retailers, charities, etc.) whose own customers may be other businesses or consumers. It has been my understanding that FINTRAC's position is that electronic funds transfers do not include certain popular payment methods such as online credit and debit card payments.
     
  2. The second scenario is a corollary of the first in that the entity in question is not “in the business of” providing online payment services (rather, the online payment services are ancillary to its core online business). Its core business is consumer electronics. On its website it offers certain services that, if purchased, would be carried out by several third party vendors, which services can be added to the consumer electronics purchases (e.g., repair/service/warranty plans). The entity will allow its online customers to pay for the third party pre-paid service plans through the same online process the consumers would use to pay for the entity's own consumer electronics (payment by credit or debit card). The entity does not hold itself out to the public as providing online payment services, and the arrangement in question is a particular contractual arrangement with several other businesses (the third parties whose services are offered in conjunction with the entity's own products online). The contractual arrangement would be a “billing service provider agreement.” The entity, further to the billing service provider agreement, would then remit payment to these third parties for the amounts owing to them for their prepaid service plans (less a small service fee).

Answer:

Money services businesses (MSB) have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In your email,you have presented two different business scenarios and would like a determination as to whether either would need to be registered as an MSB with FINTRAC. Please see my response to each scenario hereunder:

First Scenario
In the first scenario you provided, the entity in question is in the business of providing online payment services for its customers, who may be online businesses or retailers. From the information you have provided, it is my understanding that this entity would be transferring funds for its customers, who may choose to do so using different methods including debit and credit. If this is the case, this entity would be remitting and transmitting funds on behalf of its customers, whether they choose to do so via their debit card or their credit card. As such, this entity would be engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

I am providing you with a link to the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is a money services business for purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

As an MSB in Canada, this entity has legal obligations under the PCMLTFA. This includes registering with us, reporting to us, keeping records, identifying its clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of these obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Second Scenario
The second scenario you described involves an entity that is in the business of selling electronics online. On its website, it offers certain services that can be combined with the electronics such as warranties, servicing plans, etc. These services are ultimately carried out by third party vendors and consumers have the option of directly adding these services to the purchase of their electronics. Therefore, customers have the option to pay for the third party pre-paid service plans through the same online process they use to pay for the electronics. The entity would then remit payment to these third party vendors for their prepaid service plans (less a small service fee). Based on this information, it does not appear that this entity would be engaged as an MSB in Canada as per the PCMLTFA and its associated Regulations. In fact, this entity doesn't seem to provide the services of remitting and/or transferring funds for the sake of the service. This transfer of funds is simply a corollary of its actual service of selling electronics. Therefore, this entity cannot be registered with us.

 

Date answered: 2013-01-24

PI Number: PI-5489

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Registered charity in Canada - Covered or not?

Question:

Basically the question is if an entity in Canada takes money from the public and transfers the funds to an overseas entity on their behalf, are these funds transfers subject to reporting? Is the Canadian entity now acting as a non-registered MSB?

And would it matter that both entities I am referring to are registered charities in their respective countries and are places of worship (church, mosque, etc.) and the funds transfers are titled as donations provided by worshippers in Canada for the spiritual leader of the overseas church or mosque, etc.? (So essentially the Canadian charity is acting as a conduit to facilitate the collection and transfer of funds from Canada to an overseas person.)

Answer:

It appears that this entity is engaged in the business of remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network, since this entity in Canada takes money from the public and transfers the funds to an overseas entity on their behalf. As such, this entity has obligations under our Law, including to be registered as a Money Services Business.

The fact that this entity is a registered charity in Canada, is a place of worship, and the funds transfers are titled as donations provided by worshippers in Canada for the spiritual leader of the overseas church or mosque do not exempt this entity of having obligations.

Date answered: 2012-12-14

PI Number: PI-5477

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

MSB determination

Question:

An Ontario corporation is in the business of telephone service provision and airtime credit recharge service. This business is a service for providing a facility to let customers purchase airtime credit amount and send it to a prepaid mobile telephone subscriber number.

Please provide guidance.

Answer:

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that ABC Inc. provides the ability to “buy AirTime Credit amount in US$ and use it to send AirTime Credit, in the recipient's local currency, to someone's mobile telephone number account” and furthermore, allows the customer to “send Credit Amount in Local Currency to Loved Ones back home in old country for them to use to make calls”, it appears that your entity is, at this time, remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network, so is engaged as a money services business in Canada and is subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. I am providing you with a link to the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is a money services business for purposes of Part 1 of the PCMLTFA.

As an MSB in Canada, you have legal obligations under Canada's PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime.

Date answered: 2012-11-30

PI Number: PI-5471

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

I want to set up a company that only exists virtually, on the Internet, and does not have any physical branches.

The principle: A user (A) wants to transfer funds to another user (B). User A uses our Web platform and makes the payment via credit card. The money is initially routed through my corporate account, after which it is transferred to user B's account, less the commission. Users may be individuals, businesses, charities, etc. What are my obligations and what is the status of my company under the existing legislation?

Answer:

A money services business (MSB) means an individual or an entity that is engaged in the business of any of the following activities:

  • foreign exchange dealing;
  • remitting or transmitting funds by any means or through any individual, entity or electronic funds transfer network; or
  • issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments. This does not include redeeming cheques payable to a named individual or entity.

Based on the business model you provided, according to the definition in section 5(h) of the Act, your company is a Canadian money services business. Your company therefore appears to be covered under our Act. As a result, you are required to register with FINTRAC, and you must comply with the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

FINTRAC Interpretation Notice No. 1, provides guidance regarding the individuals or entities that are considered as money services businesses for the purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

As a Canadian money services business, you have certain legal obligations. These include registering with FINTRAC, producing statements, keeping records, verifying client identity and having a compliance program.

Date answered: 2012-10-15

PI Number: PI-5460

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN -1

Regulations: 1(2)

Act: 5(h)

Covered or not?

Question:

Attached is our form agreement for direct selling companies (each a "Payor") using our ABC software platform. Our position is that each pay portal belongs to the Payor pursuant to a software license from XYZ Inc. The Payor uses the pay portals to communicate with payees. XYZ Inc. only accepts instructions from the Payor. Below I will demonstrate that:

  1. XYZ Inc. has no privity of contract with payees;
  2. XYZ Inc. has privity of contract with, and acts as agent for, the Payor; and
  3. the Payor has de facto control of the funds in the pay portals.

 

  1. The online contract signed by payees (MLM salespeople) is between the payee and the Payor.
     
  2. XYZ Inc. has privity of contract with, and acts as agent for, the Payor. Paragraph 6 in Part I of Schedule "A" (page 12) provides that we hold funds in pay portals as agent for the Payor and not the payee. This paragraph further provides that the Payor can recall its funds at any time. This demonstrates that we are taking instructions from the Payor. The exact language is:

    "XYZ Inc. shall act as Customer's agent with respect to all Customer funds held by XYZ Inc. and designated for distribution to Authorized Users through the Application Service. All Customer funds so designated shall be held in pooled accounts (“Pooled Accounts”) for Customer and other users of the Services, and segregated from XYZ Inc.'s operating accounts until such funds are either returned to Customer at its request, transferred to an Authorized User's bank account or cashed out to another integrated third party network. Pooled Accounts shall be designated “for the benefit of” Customer and other users of the Services where reasonably practicable, as determined by XYZ Inc. in its sole discretion.”
     

  3. the Payor has de facto control of the funds in the pay portals. The Payor receives instructions from the payee and separately authorizes XYZ Inc. to carry out those instructions. See Schedule "C", paragraph 9 (page 16), which provides:

“Customer authorizes XYZ Inc. to configure the Application Service to fulfil all Authorized User instructions for the completion of bank transfers, or cash out transactions with integrated third party networks, until further notice from Customer.”

In conclusion, As the party in between the software license provider and the payee, the Payor uses pay portals to communicate with its payees and it uses the licensed software more generally to provide payment instructions to XYZ Inc. XYZ Inc. instructions always come from the Payor, the party with whom we have a contractual relationship. The Payor has the exclusive ability to fund its pay portals. Pay portals cannot be payee-funded. When a payee enters his or her bank account information and clicks "cash out to bank account", this instruction is given to the Payor, not XYZ Inc. The Payor authorizes XYZ Inc., the software provider, to carry out those instructions.

Nearly all of our revenues come from the ABC service, and a FINTRAC mandate to KYC payees would probably put us out of business. On a more positive note, an affirmative letter that ABC is not subject to FINTRAC's regulation and EFT reporting requirements would greatly ease our administrative burdens going forward.

Answer:

Below is a summary of the information provided re: XYZ Inc.:

  • XYZ Inc. is an online MSB that offers “Wallet” accounts for its customers, where the customers can send EFTs through their online accounts.
  • One of the products XYZ Inc. offers is the ABC Pay Portal.
  • ABC Pay Portal is a global payment solution designed so a client can send payments to multiple recipients.

In the case before us, XYZ Inc. is used by companies to pay out the commissions of its sales representatives. XYZ Inc. creates virtual accounts for all of the sales representatives in its system:

  • The Payor registers ABC Pay Portal accounts for the Payees by uploading basic payee information into the system, such as their name, internal ID number, address and email address
  • The Payor uploads payment information identifying the recipients and the amounts to be paid into each recipient's account via the ABC system. The Payee's Pay Portal is automatically credited with this amount. The funds used for the payments are debited from the Payor's pre-funded ABC Loading Account
  • Payees access their Pay Portals online or by using their mobile device to transfer their payments to their bank accounts (or to an attached prepaid card, if applicable), managing their own banking information. They also have the option to automatically sweep incoming ABC payments to the bank account(s) and/or ABC prepaid card of their choice
  • In addition to transferring the funds out of their Paylution account, it is possible for Payees to integrate their online shopping cart with Paylution to enable them to use the funds in their Pay Portal to make new purchases from the company (“Spendback”)

XYZ Inc. indicated that:

  • The Payor funds are held in a pooled account, and segregated from XYZ Inc.'s operating accounts until such funds are either returned to the Payor at its request, transferred to a Payee's bank account or cashed out to another integrated third party network
  • The Payor uses pay portals to communicate with its Payees and it uses the licensed software more generally to provide payment instructions to XYZ Inc. XYZ Inc. instructions always come from the Payor
  • The Payor receives instructions from the Payee and separately authorizes XYZ Inc. to carry out those instructions
  • Pay portals cannot be Payee-funded. When a Payee enters his or her bank account information and clicks "cash out to bank account", this instruction is given to the Payor, not to XYZ Inc.
  • The Payor can set an “opt-in” or “opt-out” function for auto-cash out

Based on this information, is ABC Pay Portal, as described in XYZ Inc.'s business model, subject to the PCMLTFA and its associated Regulations?

The Centre has previously taken the position that persons or entities engaged in the business of payroll services and payments services that involve the “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network” are not considered to be MSBs because they are not engaged in the business of doing such remittance or transfers of funds.

In other words, they don't provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of their actual service: in XYZ Inc.'s case, paying commissions on behalf of another entity. Commission payments are considered the same as payroll payments.

Based on the information provided by XYZ Inc. and described above, ABC Pay Portal is a product to transfer payroll products into the Payees' bank accounts or to a pre-paid card. It is transferring funds as a corollary to a commission payment service. In this case, XYZ Inc. could be considered the “administrator” of the commission payments with options available to the payees receiving the commission. At this time and based on this information, XYZ Inc., with respect to ABC Pay Portal, is not subject to the PCMLTFA and its associated Regulations.

 

 

Date answered: 2012-09-27

PI Number: PI-5459

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1, 6C

Regulations: 1(2)

Act: 5(h)

Question regarding the meaning of “issue or redeem”.

Question:

The Act states that an entity or person is an MSB if they issue or redeem money orders, traveller's cheques or other similar negotiable instruments. The question has arisen over the meaning of “issue or redeem”.

A number of years back it was determined that if you sell any of these products, unless the products were in their name (meaning they were listed as the issuer of the product), then you were just selling the product, not issuing, and ultimately there was an agent/principal relationship involved. I believe the same interpretation was in place for the redemption part of the interpretation. It was the issuer of the product that was ultimately redeeming the product (as they were responsible for the value of the product), and that if any person or entity cashed one of these products for a customer, it did not mean they were redeeming the product, but simply cashing it.

This issue has arisen as a result of a MSB exam recently conducted whereby they admitted to having ceased FX transactions in January (conducting EFTs as an agent). Once the failure to file a cessation letter was sent, a consultant got involved and has now submitted a letter stating that the entity should still be registered as they issue/redeem money orders and travellers cheques. A conversation with the entity revealed that they cash these products for their clients (and sell them as an agent).

A had a quick look for a definition in Black's Law Dictionary (more for my interest) and here it what is says:

“A repurchase; a buying back. The act of a vendor of property in buying it back again from the purchaser at the same or an enhanced price. The right of redemption is an agreement or action, by which the vendor reserves to himself the power of taking back the thing sold by returning the price paid for it “ I am hoping that my interpretation is correct.

Answer:

In the “real world” MSBs don't take money orders in as agents of issuers. Rather they take the money order, give the client the cash, and then take the money order along with the rest of the money made for that day and deposit it into their bank account. At that point, the bank deals with the issuer to ultimately redeem the money order and get the MSB the cash equivalent for their account.

ISSUING
To make available your business' money orders or travellers cheques.

REDEEMING
In the context of the PCMLTFA, redeeming means for the issuing entity to repurchase the money orders or traveller's cheques by returning the purchase price to the buyer. An example would be the buyer returning unused traveller's cheques to the issuer.

CASHING
To accept the money orders or traveller's cheques of an issuer and return the cash equivalent to the client. This can be done based on an agent/principle relationship with the issuer, or not.

It is important to define issuing/redeeming because this is what determines whether an entity is an MSB or not, while “cashing” triggers record keeping obligations for an entity that is an MSB.

If an entity's business model is:

  1. selling the money orders, traveller's cheques or other similar negotiable instruments of their business, they are issuing, and are an MSB.
  2. accepting unused money orders, traveller's cheques or other similar negotiable instruments of their business, and returning the cash equivalent to the client, they are redeeming, and are an MSB.
  3. selling or cashing money orders, traveller's cheques or other similar negotiable instruments of an issuer, based on an agent/principle agreement with that issuer, the entity is doing this activity as an agent on behalf of the issuer and is not an MSB. This is assuming, of course, that the entity does not carry out other MSB-related activities (e.g., FX, EFTs or issuing/redeeming as defined above). As with any principal/agent relationship, the agent would be required to carry out the obligations as set out in the agreement between the two, but the principal would be ultimately responsible for ensuring proper application of the PCMLTFA.
  4. accepting the unused money orders or traveller's cheques of any issuer and returning the cash equivalent to the client, without an agent/principle relationship with the issuer(s), they are deemed to be cashing these money orders or traveller's cheques and are not an MSB. That is assuming, of course, that the entity does not carry out other MSB-related activities (e.g., FX, EFTs or issuing/redeeming as defined above).
  5. accepting the unused money orders or traveller's cheques of any issuer and returning the cash equivalent to the client, without an agent/principle relationship with the issuer(s), they are deemed to be cashing these money orders or traveller's cheques AND, if they are an MSB based on other activities carried out by the entity (e.g., FX, EFTs or issuing/redeeming as defined above), then they are subject to the MSB record keeping obligations associated with cashing, as outlined in subsection 30(d) of the PCMLTFR.
  6. accepting money orders or traveller's cheques as payment for products or services, where change in the form of cash may or may not be given, this is not considered to be redeeming or cashing a money order or traveller's cheque, so the entity is not an MSB, nor are they subject to the record keeping obligations of an MSB (if they are an MSB) associated with cashing, as outlined in subsection 30(d) of the PCMLTFR.

Date answered: 2012-09-25

PI Number: PI-5453

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Regulations: 1(2), 30(d)

Act: 5(h)

Covered or not

Question:

XYZ Inc. provides an easy-to-use interface with support for all major mobile phones operating within Canada.

Using XYZ Inc., you can:

  • Send, receive, and request money between friends, family, and co-workers
  • Link your bank account to easily load funds
  • Shop at stores and online, or withdraw money at ATMs, using the XYZ Inc. Prepaid credit Card
  • Save time and eliminates the hassle of getting cash to pay your friends, family, and co-workers or to pay for purchases

You can use XYZ Inc. anytime, anywhere while on the go via mobile phone, online, or prepaid card.

Are these activities covered by the PCMLTFA?

Answer:

Based on the information provided, namely "send, receive, and request money between friends, family, and co-workers, link your bank account to easily load funds, shop at stores and online, or withdraw money at ATMs, using the XYZ Inc. Prepaid credit Card", it appears that this entity is, at this time, engaged as a money services business in Canada, as per our Act and associated regulations, since they seem to provide remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network.

Date answered: 2012-09-17

PI Number: PI-5451

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Listing of accounts

Question:

The Regulations and guidance do not explicitly state that each account number at a financial entity must be listed.

The Regulations state : “name, address, account number and branch number or transit number of every financial entity with which the applicant maintains an account for the purpose of remitting or transmitting funds”.

The Regulations only state the information for EVERY FINANCIAL ENTITY (not EVERY ACCOUNT).

I would like clarification on the matter?

Answer:

The information outlined in Schedule 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations is information to be included in the application for registration or renewal of registration, notification of changes to information in existing application, notification of newly obtained information and clarification of information in existing application.

The intent of question 9 in Part B of Schedule 1 is to obtain, from the applicant, the account number of every bank account used by the applicant for the purpose of remitting or transmitting funds. While the reference to the name address and branch or transit number is specific to the financial entity, the reference to “account number” is specific to the applicant's account number(s), at that financial entity, used for the purpose of remitting or transmitting funds,.

Therefore, item 9 in Part B of Schedule 1 of the MSB Registration Regulations is asking for the name, address and branch or transit number of every financial entity at which the applicant has an account or accounts for the purpose of remitting or transmitting funds AND every account number of the applicant at the financial entity or entities listed for the purpose of remitting or transmitting funds.

Date answered: 2012-08-29

PI Number: PI-5444

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Regulations: Schedule 1- Part B- Section 9

Covered or not

Question:

ABC Inc. is primarily a services oriented business, but has several different revenue models. ABC provides services and a few products that help non-profit organizations accept and manage donations.

We plan to have several revenue streams, each with a different model. They are:

Model 1 (Software as a Service): Clients subscribe to a monthly service that enables them to organize / track incoming donations. We do not manage or handle the funds in any way.

Model 2 (Direct Sales): Prior to starting their monthly subscription, clients would purchase a product directly from ABC inc.

Model 3 (Direct Rental & Processing Services): In this model we rent kiosks for accepting donations, and we also process the credit card / debit transactions. Our client (the non-profit) would pay a rental fee to have the kiosk at their event. Every donation made at the Kiosk would be processed by our merchant accounts, and the donation would be deposited into our Bank Account by the credit/debit processor. We would then forward the money along with the donor details to our client. The method of transferring the funds from our account to our clients account would be via cheque or EFT. We would then collect or hold back a fee for providing the transaction service.

We estimate that the vast majority of our revenue will be through Model 1 and 2, but we do plan to bring Model 3 online sometime in the first year of doing business as well.

ABC Ltd. (recently changed our name), is a Canadian Federally Incorporated Company, with an office in BC.

Answer:

To determine if you are engaged in the money services business in Canada, I have first to determine the applicability of paragraph 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the determination of whether you have a "real and substantial connection" with Canada.

As such, some of the criteria I rely on to determine whether a person or entity is “engaged in the money services business in Canada" are for example: if the business is incorporated in Canada, if the business has agents in Canada, if the business has physical locations in Canada or if the business maintains a bank account or a server in Canada (among others).

Unless there is a substantive connection to Canada we do not consider the entity as conducting a money services business in Canada.

In this respect, could you please provide the reasons why you believe you have a sufficient presence in Canada?

Also, for your information, I am providing you with the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is a money services business for purposes of Part 1 of the PCMLTFA.

That being said, , it appears that your entity is engaged in the business of remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network, namely “the donation would be deposited into our Bank Account by the credit/debit processor. We would then forward the money along with the donor details to our client. The method of transferring the funds from our account to our clients account would be via cheque or EFT”. At this time, ABC Ltd. is engaged in the money services business. As such, your entity has obligations under our Law, including to be registered as a Money Services Business.

Date answered: 2012-07-24

PI Number: PI-5433

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN -1

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

Our business model is for advanced real estate commissions to agents. We have our own capital fund in order to just lend funds to agents.

Are we considered to be a money services business?

Answer:

Based on the information gathered, I understand that you are engaged in the business of lending of money to real estate agents within Canada that have made residential property sales that are in the final stages of the closing of the sale. At the point that an agent with whom the entity has agreed to deal with demonstrates to him that the pending sale is shown as sold, he will advance funds to the agent (through wiring?), a portion of the commission that the agent would normally receive upon the final closing of the sale. Upon the transfer of title and final closing of the residential property sale the commission paid by the vendor that would normally have been paid to the agent is now paid to entity to repay the loan, interest, and other fees or charges on said loan.

Based only on this information, the entity is not engaged in the business of wiring per se... Therefore, is not an MSB.

Date answered: 2012-07-05

PI Number: PI-5425

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

We will receive foreign currency on consignment from a major Canadian bank, to be placed into, and dispensed from, an ATM. The extent of the foreign currency transaction would be an individual using his or her debit card to withdraw foreign funds from an ATM. ABC does not and will not set any exchange rates, but simply receive the currency from the bank to be placed into an ATM.

Answer:

According to the activities described, namely “ receive foreign currency on consignment from a major Canadian bank, to be placed into, and dispensed from, an ATM. The extent of the foreign currency transaction would be an individual using his or her debit card to withdraw foreign funds from an ATM. ABC does not and will not set any exchange rates, but simply receive the currency from the bank to be placed into an ATM”, these activities are not covered under our legislation, Proceeds of Crime (Money Laundering) and Terrorist Financing Act, since your entity is not engaged in the business of foreign exchange dealing, remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network, or issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In fact, and based solely on the business model explained, it seems like you are offering the service of transport of cash from point A to point B to clients.

Please note that should your business model change in the future to expand beyond the receipt of currency from the bank to be placed into an ATM, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Date answered: 2012-07-04

PI Number: PI-5424

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1, FIN-5

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

  1. The main goal of our website/software is to allow for peer to peer (p2p) foreign exchange dealing. This cuts out the need for banks/brokerage houses which charge large fees and give wide spreads on their prices.

    Example trade:
    Customer A transfers us 10,000 CAD from their Canadian bank a/c to ABC's Canadian a/c. They put a bid on to the site for USD at say 99 cents.
    Customer B wants to buy CAD so transfers us USD from their USD bank a/c to our USD bank a/c and agrees to sell 10,101.01 USD to buy Customer A's 10,000 CAD.

  2. The funds are converted as above. There will be no cross border transfers however, as ABC will have local accounts in all currencies we offer. So, in the trade above, Customer A will receive their USD funds from our USD a/c into their USD a/c and Customer B will receive CAD in same manner.
  3. FX rates will be determined by customers. They will put prices they want to deal at on our platform.
  4. We will charge a fee to one side of the trade above.

The multi-currency wallet on our site will be the credit the client holds. Before undertaking an exchange on our platform the client will be required to transfer to ABC the necessary funds. So, for instance, if a client wishes to sell GBP and buy CAD they would be required to transfer to ABC's GBP account. Once we have confirmed receipt we would credit their multi-currency wallet with the GBP amount. Once an exchange takes place, we credit the client's multi-currency wallet with the CAD funds purchased. If client then decides to receive the CAD funds, ABC would conduct an electronic transfer from our CAD account to the client's CAD bank account.

Does the above scenario fall under the umbrella of FINTRAC?

Answer:

Money services businesses (MSBs) have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

  • Foreign exchange dealing;
  • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
  • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information provided in your business model, it appears that your entity is not, at this time, engaged in the business of foreign exchange dealing as per our Act and associated regulations. It seems that your entity provides a platform allowing peer to peer to conduct foreign exchange dealing. Therefore, you do not have to register your entity with us.

With respect to your multi-currency wallet , and based solely on this information, it appears that your entity is also not, at this time, engaged in the business of remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network as per our Act and associated regulations. In fact, your entity does not provide the services of remitting or transferring funds for the sake of the service. The transfer of funds is simply a corollary of your actual service, namely “offering a platform allowing peer to peer to conduct foreign exchange dealing”. In your case, the electronic transfers are only a method of payment in relation to the foreign exchange dealing.

Should your business model change in the future to expand beyond offering a platform allowing peer to peer to conduct foreign exchange dealing, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

 

Date answered: 2012-06-14

PI Number: PI-5412

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Securities dealer vs. MSB

Question:

The definition of a money services business in the Act is noted as: persons and entities engaged in the business of foreign exchange dealing, of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments except for cheques payable to a named person or entity;

There is additional clarification in the interpretations notice that states that a business would be exempt from MSB registration if the activity was carried out as part of another regulated activity (purchasing securities is provided as an example here).

The question in this regard is whether the MSB definition would apply to a securities dealer that is also conducting foreign exchange transactions outside of the scope of securities related purchases - are they also required to be registered as an MSB?

Answer:

Should a securities dealer provide money services business (MSB) activities, such as foreign exchange, outside of their securities dealer activities, the securities dealer would be required to register as an MSB. Upon registration as an MSB, the registrant would indicate that their business is also another type of reporting entity (i.e., a securities dealer). As an MSB and a securities dealer, the entity would be subject to all applicable sections of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated regulations.

Date answered: 2012-05-02

PI Number: PI-5404

Activity Sector(s): Money services businesses, Securities dealers

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(g), 5(h)

Mandatary/Agent

Question:

The regulation permits the use of a mandatary for identification purposes provided that a written agreement is entered into prior to the use of the mandatary to identify clients. In these situations, the mandatary is generally not an agent (in the sense that they process transactions), but merely verifying identification and collecting KYC information. Guidance to MSBs (specifically section 2.1 of the Guide for Electronic Registration of Money Services Businesses) notes that these terms are used interchangeably. This implies that MSBs should be listing mandataries as agents in their FINTRAC registration.

Could you please confirm whether or not this would be the case for a mandatary that is only verifying identification and collecting KYC information?

Answer:

Subsection 11.12 (1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act states that “an application for registration shall be submitted to the Centre in the prescribed form and manner, shall include a list of the applicant's agents, mandataries or branches that are engaged, on behalf of the applicant, in the activities referred to in paragraph 5(h), in selling money orders to the public if the applicant is a person or entity referred to in paragraph 5(l), or in any prescribed activities, and shall include any prescribed information”.

The intention of the Act is not to require MSB to identify their mandatary that is only verifying identification and collecting KYC information. Rather, the term "agent" that is being used would really be in the context of "acting on behalf of" to engage in the business of the MSB.

Therefore, the mandatary that is only verifying identification and collecting KYC information should not be listed as agent in the FINTRAC registration.

Date answered: 2012-04-17

PI Number: PI-5401

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Act: 11.12(1), 5(h), 5(l)

Covered or not

Question:

654 Cash intends to initially enter the market offering digital money transfer using our technology platform. That platform performs the following functions:

  • Creation of an eWallet (customer account, etc.)
  • Load/re-load eWallet – money is transferred electronically from the client's bank account into the eWallet
  • Money Transfer – the client identifies target recipient, the system generates a unique and secure PIN. The client then provides the PIN to the recipient via SMS, email or phone. The recipient visits a 654 Cash Agent who accesses the 654 Cash system, validates the PIN and provides cash to the recipient.

Our distribution channels are intended to be as follows:

  • Online – via internet marketing activities such as SEO/SEM
  • Mobile Application – under development, but all of the online functions can be completed from most smartphones, tablets, etc.
  • Licensees & Associates – through a distribution agreement with another company, licensees and associates will promote the product and will drive their clients to the website. Unique ID's will be used to track and compensate licensee and associate activities

Fulfillment: In-country agents will be recruited either directly by the company or via referrals from individuals, clients, licensees or associates. In country cash dispensing agents will be provided with means to electronically and securely validate a PIN and will be compensated (commission) for acting as cashing agent.

As we continue to develop the platform, we intend to also offer bill payment (both domestic and international) as well as merchant payment opportunities (i.e. purchase a gift card/vouchers for a family member in another country).

Answer:

It would appear that 654 Cash remits funds and transmits funds by any means or through any individual, entity or electronic funds transfer network, and appears to be engaged in foreign exchange dealing. 654 Cash is a money service business in Canada, as defined in paragraph 5(h) of the Act. It would thus appear that 654 Cash is covered by the Act and must therefore register with FINTRAC and comply with the obligations set out in the Act.

Date answered: 2012-03-22

PI Number: PI-5397

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

Two companies of ABC Group may have some activities related to the financial transactions and we would like to see whether these activities confirm with the requirements of FINTRAC for the "reporting agencies".

We would appreciate your review of the following descriptions of our activities and correlating decision whether such activities may pose an obligation to report to FINTRAC or not.

  1. ABC Corp. sells POS (point of sale) solutions, provides merchant services and transaction services for the payments being issued through POS. ABC Corp. does not deal with money, cash, deposits or money transfers. Moreover, ABC Corp. services are being provided as an agent connecting merchant's POS to the INTERAC banking system through 123 or 456 service providers.
     
  2. ABC Security Ltd. (ASL) provides armed couriers and armed guards' services. ASL is providing cash dispensing services to our clients by collecting cash from our clients' accounts and dispensing the cash in ATM's owned by our clients. ASSL does not own the ATM's or the cash being disposed, but ASL operates the vault facility at which the cash is being stored from its withdrawal from the bank and until it is being dispensed to the ATM's.

Answer:

Based on your current business model and the services you indicated your corporation is offering, here are some comments:

ABC Corp : According to the activities described, these activities are not covered under our legislation, Proceeds of Crime (Money Laundering) and Terrorist Financing Act, because it appears you do payment processing.

ABC Security Ltd. : According to the activities described, these activities are not covered under our legislation, Proceeds of Crime (Money Laundering) and Terrorist Financing Act, because the armoured vehicle industry does not engage in the money services business within our Act and regulations. The armoured vehicle industry transports cash and valuables from point A to point B... it is only a service of transport that is offered to clients.

Date answered: 2012-03-02

PI Number: PI-5389

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

The service is aimed at the real estate property sector. Among other services, they enable consumers who lease property, to make one-time online and/or recurring payments via credit cards, debit cards and EFT for their monthly lease payments. The company collects these funds and then remits them to the real estate property owners/managers. For EFT payments, the funds would normally flow from the consumer's bank, to an account held by the company at his bank, and then finally settled to the property owners.

The question is whether this business model requires registration as an MSB.

Answer:

According to the activities described, namely “enable consumers who lease property, to make one-time online and/or recurring payments via credit cards, debit cards and EFT for their monthly lease payments. The company collects these funds and then remits them to the real estate property owners/managers”, these activities are not covered under our legislation, Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Therefore, unless your client chooses to include other types of activities, it has no obligation under our Law to be registered as a Money Services Business. At first glance, the company appears to do payment processing (rent collection). This activity would not qualify the entity as being engaged in the money services business.

For more information, FINTRAC Interpretation Notice, FIN 1, provides guidance regarding who is a money services business for purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

Date answered: 2011-12-21

PI Number: PI-5372

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Commission payments considered the same as payroll

Question:

Are commission payments considered the same as payroll. A commission payment differs from regular payroll because the amount paid varies depending on the amount of commission the person earns. They want to know if they need to perform record keeping, client identification, and reporting on commission payment EFTs.

Answer:

Commission payments are considered the same as payrolls payments and not a money services business activities covered under our legislation.

It is important to ensure that the commission payments that are handled by the MSB are from employers/merchants to their employees only (and not open to the general public).

Date answered: 2010-11-26

PI Number: PI-5365

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 6C, 8

Agents and B5 of registration form

Question:

If an MSB is also an agent of another Canadian MSB, do we expect them to provide this information in Part B5 of the registration form?

Answer:

The guidance in the MSB Registration application Field A15 instructions are pretty clear not to include activities performed as an agent.

"Field A15 Activities of the applicant: Indicate the activities in which you are engaged by checking all applicable boxes. Do not include activities if you perform them only as an agent or mandatary for another business."

I understand that the principal has an obligation under section C1 to include all of their agents and the activities performed at the agent location on behalf of the principal. Activities conducted on behalf of a principal need not be included in the agent's MSB registration form.

Date answered: 2010-05-03

PI Number: PI-5360

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Act: 11.12

Are sole proprietors persons?

Question:

Sole proprietors, in the eyes of our law, considered persons and "not" entities, correct?

Answer:

Sole proprietor is a type of business that is owned and run by one individual and in which there is no legal distinction between the owner and the business. Therefore is it considered a person as defined by Section 2 of the Act, and not an entity.

Date answered: 2010-03-31

PI Number: PI-5342

Activity Sector(s): Financial entities

Obligation(s): Money services businesses

Act: 2

Pay Day Loan Companies

Question:

In reference to pay day lenders that provide loans via the internet, they fund the loans by directing their bank to transfer amounts into the bank account of the borrower. They have their loans repaid by debiting the persons bank account after they have been paid through pre-authorized debit arrangements with their bank.

Does FINTRAC view their method of funding as "transmitting or remitting funds" so as to be a MSB?

Answer:

This does not fit the criteria, as long as they are only depositing the funds into the borrower's account. My thought is that if the funds were sent to a third party then they would cross over into an MSB transaction as they would be conducting an EFT at the borrower's request. The entity itself is not the business of money services, rather it is in the business of offering a specific service, which is to provide loans. And it would be a question of fact to determine if the entity started to send the funds to a third party, as per the instructions of the borrower - then yes they may fall within the MSB business (but again we would have to review such a business model).

Date answered: 2010-03-11

PI Number: PI-5334

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not covered?

Question:

When a client is acting as a Disbursement Agent or service provider for an Entity, the Entity will want any shareholder whose address of record is in a foreign jurisdiction to be paid in US dollars and/or in another foreign currency. In these circumstances, the Entity will usually provide the client with the funds in the foreign currency.

While in the occasional circumstances a wire is sent as a means of payment, the client is not in the business of remitting or transmitting funds.

In the interim, the client is now considering offering the payees of these distributions (i.e. the shareholders) the option of receiving their payout entitlement in a foreign currency (most likely, their local currency).

In these circumstances, would the client be considered an MSB under the Act?

Answer:

Transfer agents are not considered MSBs. However, if they provide foreign currency exchange services, they would be captured. If the entity considers providing foreign exchange services in the future, the entity would be considered as an MSB.

Date answered: 2010-02-17

PI Number: PI-5322

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Multi-Currency Drafts and examination scopes

Question:

A client wants 100,000$ in British pounds. The client drafts a check in CDA $. In return, the entity should emit a check in British pounds. Can we examine these types of transactions?

A multi-currency draft is drawn on a foreign denominated bank account. This form of payment is sometimes preferred in countries whose bank systems tend to prioritize wire transfers by transaction size. In other instances, multi-currency drafts are also preferable to the recipient, since beneficiary banks' incoming wire charges are substantially higher versus a simple draft deposit.

Answer:

The Centre understands that there is an actual foreign exchange taking place (not just speculation on currency which would be done through a securities dealer) via an MSB and as such, it can certainly be scoped in your examination.

Date answered: 2010-02-17

PI Number: PI-5320

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 2

Contracts and foreign exchange transactions

Question:

Is there effectively a foreign currency exchange operation taking place?

  • "Forward Contracts" - Allow you to buy or sell currencies at a fixed exchange rate for settlement beyond the spot date. Forward contracts are used to protect against rate fluctuations that could impact the value of foreign currency payables and receivables.
  • "Outright" - A fixed delivery date in the future.
  • "Option with Variable Delivery" - A fixed delivery period (e.g. a 30-day window) to exercise an option forward. Settlement can be at any time within a predetermined window of time, rather than a specific date in the future. Variable delivery contracts are helpful tools in managing the risk associated with letter-of-credit payments or other foreign currency payments when it is difficult to determine the exact payment date.
  • "Foreign Exchange Swaps" - These are simultaneous agreements to purchase currency for one value date and sell it back for another. Swaps are used to extend the maturity of an existing contract or protect an investor against rate fluctuations between the time an investment is made and when it matures.

Answer:

In this particular scenario, there is an actual foreign currency exchange taking place for the client by the MSB (not just speculation on currency which would be done through a securities dealer) and as such, it would fall within the scope of your examination.

Date answered: 2010-02-17

PI Number: PI-5319

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1, 6 C

Regulations: 2, 32

Act: 5(h)

Request for discussion

Question:

Section 11.12(1) of the Act indicates that an application for registration must be submitted to us in the prescribed form and manner.
Among the information that the MSB must include with his registration application is the following (and keep up to date once registered): – Name and address of every Canadian money services business used by the applicant to conduct transactions.

  • What do we mean by the name and address of every Canadian money services business used by the applicant to conduct transactions? 
  • Must the MSB include the name of the MSBs which are its clients (i.e. that they use the applicant to conduct transactions) and/or the name of the MSBs the applicant is using to conduct transactions?
  • Must the applicant include each and every one of the MSBs with which it is conducting transaction(s) even if the applicant does not have an ongoing business relationship with them?
  • How many transactions does the applicant have to conduct to qualify as an ongoing business relationship?

Answer:

  • The applicant must only include on his application for registration (and online once registered) the MSBs the applicant is using to conduct transactions.
  • The applicant should list the MSBs with which the applicant has an “ongoing” business relationship.
  • An “ongoing” business relationship is qualified as the following:
  1. The applicant conducts 20% or more of his annual volume of transactions with this MSB; or
  2. The applicant conducts 20% or more of his annual gross revenue with this MSB; or
  3. The applicant has an ongoing written agreement with this MSB.

Date answered: 2010-01-29

PI Number: PI-5307

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Act: 11.12(1)

MSB Registration. Clarification question

Question:

A Money Service Business had one-off transactions with other MSBs (as a supplier mostly/MSB calls the RE up looking for a rate on Euros/a deal is done and the RE never has any other transactions with this MSB). MSBs have the obligation to keep their registration info up-to-date (within 30 days of any changes).

  1. Should the names of these entities also be included?
  2. If the answer to this question is yes, when the RE should add/delete names of the MSBs in cases of one-off transactions?

Answer:

The MSB listed in the application/registration must include:

  1. The name of the MSBs of which it is a client (i.e. from whom it purchases sells currencies from) i.e. MSBs with whom it conducts transactions on its own behalf, and
  2. The name of the MSBs which are its client i.e. MSBs that approach it to buy/sell currency for their own needs.

Please note, one off is not considered as an ongoing relationship and therefore should not be listed.

Date answered: 2010-01-05

PI Number: PI-4760

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Act: 11.12(1)

MSB Registry

Question:

MSBs have the obligation to register with FINTRAC and said registration must contain certain information:

11.12 (1) An application for registration shall be submitted to the Centre in the prescribed form and manner, shall include a list of the applicant's agents, mandataries or branches that are engaged, on behalf of the applicant, in the activities referred to in paragraph 5(h), in selling money orders to the public if the applicant is a person or entity referred to in paragraph 5(l), or in any prescribed activities, and shall include any prescribed information.

Among the information that the MSB must include with his registration is the following: in Part B, item 10: Name and address of every Canadian money services business used by the applicant to conduct transactions and the registration number issued to that money services business by the Centre.

It has had one-off transactions with other MSBs (as a supplier mostly/MSB calls him up looking for a rate on Euros. A deal is done and the RE never has any other transactions with this MSB)

Should the name of these entities also be included?

This latter question is interesting since MSBs have the obligation to keep their registration info up-to-date (within 30 days of any changes) and, if the answer to this question is yes, this raises all kinds of issues (when to add/delete name of the MSB in cases of one-off transactions as an example).

Answer:

MSB listed in the application/registration must include: The name of the MSBs which are its client i.e. MSBs who approach it to buy/sell currency for their own needs.

Date answered: 2009-12-09

PI Number: PI-4750

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Regulations: 11.12 (1)

Act: 5(h), 5(l)

MSB Registry

Question:

MSBs have the obligation to register with FINTRAC and said registration must contain certain information:

11.12 (1) An application for registration shall be submitted to the Centre in the prescribed form and manner, shall include a list of the applicant's agents, mandataries or branches that are engaged, on behalf of the applicant, in the activities referred to in paragraph 5(h), in selling money orders to the public if the applicant is a person or entity referred to in paragraph 5(l), or in any prescribed activities, and shall include any prescribed information.

Among the information that the MSB must include with his registration is the following: in Part B, item 10: Name and address of every Canadian money services business used by the applicant to conduct transactions and the registration number issued to that money services business by the Centre.

The Compliance Officer raised a question during the course of the exam: What do we mean by: Name and address of every Canadian money services business used by the applicant to conduct transactions

Must the MSB include: the name of only those MSBs of which it is a client (i.e. from whom it purchases sells currencies from)?

In other words, MSBs with whom it conducts transactions on its own behalf the name of only those MSBs which are its client (i.e. use this MSB as a supplier fx)? MSBs that approach it to buy/sell currency for their own needs? Or both?

Answer:

MSB listed in the application/registration must include: The name of the MSBs of which it is a client (i.e. from whom it purchases sells currencies from) i.e. MSBs with whom it conducts transactions on its own behalf.

Date answered: 2009-12-09

PI Number: PI-4749

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Regulations: 11.12 (1)

Act: 5(h), 5(l)

Banknotes, DPMS and foreign exchange dealing

Question:

Would a business that buys pre-euro banknotes be conducting "foreign exchange dealing" and therefore be "Engaged in a Money Services Business? Pre-euro banknotes (ie, French Francs, German Deutsche Marks, and Italian Lira) are not legal tender and are not traded for foreign currency anywhere in the world.

If this is considered "foreign exchange dealing", do coin/banknote collecting companies (numismatic – collection of currency/notaphilist – collecting bank notes) also fall under this category?

Answer:

If the entity is collecting banknotes the RE would not qualify as a MSB.

If however, the entity is exchanging the banknotes for other currencies, they would be engaged in the money services business, namely foreign exchange. The pre-Euro banknotes are still in circulation and being bought by some Central Banks, and are considered to be currency.

Now if the entity would be buying coins that are made of precious metals - and they hit the threshold of 10,000 or more (sale or purchase) - then they would qualify as a Dealer in Precious Metals and Stones (DPMS).

Date answered: 2009-09-22

PI Number: PI-4689

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 39.1

Act: 5(h)

MSB determination

Question:

ABC is a bank card transaction processor. They do credit card cash advance, debit point of sale, etc. As part of the transaction, an Integrated Payment Systems (IPS) money order is generated. There is 'no' cash in, however. All ABC transactions are 'cash out'.

In Canada, ABC has a subsidiary called 123CASH Inc. which processes transactions in Canada for casinos using the IPS money order draft. I should mention that the IPS money order draft is made payable to the casino, not the casino's patron. Once the casino cashier and patron have approved and signed off on the transaction, the casino hands out their money to the patron.

The casino handles customer identification; know your customer, etc. duties. You will find attached a diagram to make this a little easier to understand. ACM stands for Automatic Cashier Machine and it operates like an ATM. It uses built in biometrics verification and the patron has to first enrol and go through a process before use.

In the next month or two, ABC will be processing its own money order settlement drafts as opposed to IPS with casinos. In addition, some casinos will choose the non-deposit route in order to obtain replenishment funds faster.

In other words, as opposed to depositing the settlement draft check (made payable to the casino yet signed by the patron who obtained the cash), ABC will reconcile the transactions and fund via ACH casinos that choose this option. The hard copy drafts will only be used in case of disputes regarding fraud and any law enforcement requests.

Based on their business model and the information they provided us with, is ABC considered an MSB under the Act?

Answer:

Based on the information you provided, we came to the conclusion that ABC would not be deemed an MSB, as they are not engaged in a money service business. Their activities are really cash advance on credit cards.

Date answered: 2009-09-21

PI Number: PI-4686

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

MSB determination

Question:

What criteria does FINTRAC consider to determine if a person or entity should register as a money service business?

Answer:

To determine if you are engaged in the money services business in Canada, we have to determine the applicability of paragraph 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the determination of whether your entity has a "real and substantial connection" with Canada.

As such, some of the criteria we rely on to determine whether a person or entity is “engaged in the money services business in Canada" are for example: if the business is incorporated in Canada; if the business has agents in Canada or if the business maintains a bank account in Canada.

Date answered: 2009-09-18

PI Number: PI-4683

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

MSB determination

Question:

Does a MSB have to register if it has no physical presence in Canada but does have a Canadian agent to assist with the funds transfer between Canada and a foreign jurisdiction?

Answer:

The main entity is the one in Pakistan but they should register, due to the Canadian agent.

Date answered: 2009-08-11

PI Number: PI-4651

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: Schedule 1- Part C PCMLTFRR

Act: 5(h), 11.1

FX or not? When exchanging it to wire it

Question:

Agents have told us, the MSB only accepts Canadian currency. Thus, when a customer comes in with American currency as payment for a wire, they must first convert it into Canadian funds. Is this U.S. to Canadian considered a method of payment or an FX transaction?

Answer:

It is a question of fact. It should be considered as a foreign exchange transaction.

Date answered: 2009-08-05

PI Number: PI-4643

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Covered or not covered by definition of an MSB

Question:

Regarding a business which transfers money an interesting thing on their money transfer service is that it seems to be offered only to their members reducing the risk for client ID (anonymity) like other online companies:

In addition,the entity goes beyond the Internet to deliver ultra-cheap mobile calls across the globe. And the entity allows their members to transfer or receive money from anywhere in the world at low cost.

Furthermore, the service is powered by an Australian company and the transfers seem to be linked to an existing bank account (debit/credit card):

The entity transfers money from your debit or credit card directly into the recipient's account, making it more convenient and faster than money orders or cheques. The transferred money is taken as a 'service' from your card rather than a cash transfer, allowing you to enjoy interest-free days and loyalty points if offered by your card provider.

Answer:

If this entity has a clear and substantive connection to Canada (such as a server based here or bricks and mortar or employees etc). then yes it would have to register as a money services business with FINTRAC.

Here are the reasons why:

  1. They transfer money (as in wires the money) from anywhere around the world and from any types of clients;
  2. They at one point in time handles the money - as in receives the money in their "bank account" and then transfers it for the recipients;
  3.  It is irrelevant if the money comes from your debit or credit card - it still travels to the entity's account and then it is wired.

Date answered: 2009-07-29

PI Number: PI-4637

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN 1

Regulations: 1(2)

Act: 5(h)

Field B10: Annual value

Question:

Please provide comments on what is meant by the "annual value" in field B10 of the MSB Registration form? 

The annual value is the gross total sales of products and services provided in the context of MSB activities.
For foreign exchange, the annual value is the gross total sales plus the gross total purchases of currency before deductions in a calendar year.
For issuance and redemption of negotiable instruments, the annual value is the gross total sales plus the gross total redemptions before deduction in a calendar year.
For the transmission and remittance of funds, the total value is the gross amount of funds remitted, transmitted or received before deductions in a calendar year.

Please also confirm that deductions such as taxes and fees should not be included in the total value.

Answer:

Here are a few comments in regards to the guide.

FIELD B5: Information of MSBs used to conduct transactions. Should stay as is - the regulations require that the MSB enter the information about each Cdn MSB they use to conduct transactions, and that information required includes their registration number.

FIELD B8: Activities in a dwelling house. Because this information is important to have - the instructions should remain the same for the time being. We should be aiming however to eventually have two captions for this information i.e. dwelling house for main location or branches of the MSB - and dwelling house for agents of the MSB.

FIELD B10: Annual Value of applicant (instead of Revenues).

Date answered: 2009-06-30

PI Number: PI-4616

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

MSB registration: main locations of a UK MSB

Question:

An MSB is the main branch or location in Canada of a UK MSB (based in London, England). Therefore, the UK MSB would have to register its main location in Canada in our registry as a money services business and in turn the Canadian main branch would have to list its agents across Canada.

A UK MSB registers with us and provide us a letter providing access to registry information to the main Branch operator listed above.

The UK MSB sends us a formal letter/fax Confirming the Mississauga location to become the Main branch and we would register as the main branch of MSB and will be responsible for registration purposes in CANADA.

I believe that Option #2 would require the main branch to have full compliance regime in place and therefore may be less appealing to the caller. Is this correct?

Answer:

The UK MSB would need to register as a principal with the Canadian main branch as his agent. Then the Canadian main branch would also be a MSB on its own (as a principal) with a list of agents in Canada.

Date answered: 2009-06-26

PI Number: PI-4613

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Regulations: Part C - PCMLTFRR

Act: 11.12

Changes in business model impact on Covered or Not Covered

Question:

Our assessment is that by limiting the scope of services that staff of a Canadian MSB provide to foreign MSB offshore clients to administrative functions and by ensuring that the foreign MSB does not have any clients in Canada, that foreign MSB will not be required to register as an MSB correct?

I note the following changes we plan to make:

  1. All future Canadian resident clients will be clients of the MSB registered to the Canadian MSB entity, and will not be able to sign up with Foreign MSB
  2. All existing Canadian based clients of foreign MSB will be changed to Canadian MSB
  3. When Canadian MSB Toronto staff have contact with foreign MSB non-Canadian based clients they will not be able to book exchange rates with those customers
  4. The foreign MSB will have no staff in Canada

We see no limitation on the Canadian MSB staff providing out of hours administrative services to foreign MSB clients as part of our 24 hour service structure, and cannot see this constituting the foreign MSB operating an MSB business in Canada if the changes above are put in place.

We believe the Canadian MSB is operating as an MSB and separately providing call centre services to an offshore company and its offshore clients. Our reading of the PCMLTFA and the guidelines suggests this course of action is appropriate and reasonable.

Answer:

If the entity adopts this business model (based of course on the information provided) you are right, they would not be covered.

Date answered: 2009-06-09

PI Number: PI-4595

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or Not

Question:

The assessment seems inconsistent with our understanding of the Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "Act"), so I am requesting further information in writing on precisely why FINTRAC does not consider us to be engaged in the business of money services and does not believe that we fall under paragraph 5(h) of the Act.

It was our expectation that FINTRAC would conclude that our business was consistent paragraph 5(h) of the Act and that we would therefore be required to register. In our day to day servicing of clients, our activities will include:

  1. Foreign exchange dealing
  2. Remitting and transmitting funds through various entities (primarily the Y Bank of Canada) on behalf of third party clients for the purpose of tuition payments

At some point in the near future, we may also wish to allow our clients to transfer funds from their personal Canadian bank accounts in Canada to their personal bank accounts in foreign countries for the purpose of covering living expenses, entertainment, etc, while attending foreign educational institutions. Rather than waiting to register for this component, we had expected that our initial activities
as enumerated above would be deemed as money services and therefore we would be registered with FINTRAC. This would therefore
allow us to expand into other areas of the funds transfer and remittance business without concern as to exactly when our actions begin to constitute money services and therefore require registration at some unknown time in the future, since we would already be registered and making reports as necessary to FINTRAC.

The payment flow on most transactions will be such that funds will flow to our business accounts when we act as an intermediary between funds transmitters and recipients. As such, there may be a disconnect in the payment flow and reporting that would be available to our financial institutions, and we believe we would therefore be required to report (for example, High Value Non-SWIFT Electronic Funds Transfers) to FINTRAC directly in order to ensure FINTRAC receives full details on all involved parties. While the majority of our dealings in EFT and Foreign Exchange dealing will be initially handled through the Y Bank of Canada, it is highly likely that certain foreign exchange and EFT transactions that we carry out on behalf of our Canadian clients may in some instances be carried out on our behalf by third parties who do not report to FINTRAC (for example, a US financial institution or US foreign exchange broker). So, it seems that we should be reporting directly to FINTRAC from the beginning.

As per paragraph 11.18 of the Act, if you cannot accept our application for registration, we kindly ask that you provide a more detailed written reason as to why you do not view our activities as falling under the definition of a money services business. This will allow us to better understand your position as to what actions would redefine us as being in the business of money services.

Answer:

Based on your current business model and the services you indicated your corporation will be offering i.e. "payments of tuition fees for Canadians who are studying at Universities in the United States" we would like to inform you that your corporation is not at this time "engaged in the money services business" but rather is engaged in offering bill payments services to students. As such your business model does not fall under the criteria of a money services business within our Act and associated regulations. The intent of our legislation was to cover money services businesses and not entities that offer bill payment services.

Date answered: 2009-04-23

PI Number: PI-4416

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 11.18, 5(h)

Subject or not subject to the PCMLTFA

Question:

  1. ABC is an online payment processing provider.
     
  2. Our clients are global and use credit/debit cards, ACH and EFT bank transfers, money wires and cashiers cheques to use in our system.

    We are a combined e-wallet and buy online service. Members are able to hold a balance in their online accounts with us as well as purchase products/services from qualified merchants directly.
     

  3. Although anyone can signup for our services, members wishing to do any purchasing or selling are required to submit valid government issued photo ID such as a drivers license or passport as well as a recent utility bill, bank or credit card statement matching the name and address that they have registered with.

To clarify:

  • our clients are only paying for products and services online.
  • We do not receive funds that we then send elsewhere on behalf of a client.

ABC is an online "e-wallet" service. Clients create accounts, verify their ID, phone and address and then fund their "wallet" in order to purchase from verified online merchants.

Example:

  1. Client X wants to fund their wallet with $250, so he sends us a cashiers cheque. Once his cheque has cleared, his wallet is updated and he now has $249 online spending money that he can go shopping with. (there is a $1 transaction fee for our services). He spends his $250 at 3 different online merchants.
  2. Client Y wants to fund their wallet with a larger amount, so they send a bank wire for $15,000. Once the wire has been confirmed, off they go to do their online shopping. Does this larger amount require reporting?
  3. Merchant Z has made $20,000 in accumulated sales over the past 2 months.

They request this amount via a bank wire and live in Florida. Would this amount require reporting and registration with FINTRAC?

Answer:

Based on ABC activities in their website they would be considered an MSB. They meet the definition of an MSB as per the FIN link below.

As per their website: "Upon payment of the specified transaction fees, ABC agrees to provide you (the "End User") a service that enables the "End User" the right to use our services to send and receive monies as available in said account".

They advertise and provide transmission of money and have presence in Canada.

Date answered: 2009-04-17

PI Number: PI-4412

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

Two companies are newly incorporated in the Province of Alberta. These companies are buying the assets of a company incorporated in the Province of British Columbia. The new companies are going to be engaged in the lending of money to real estate agents within Canada that have made residential property sales that are in the final stages of the closing of the sale. At the point that an agent with whom we have agreed to deal with demonstrates to us that the pending sale is among other criteria, shown as sold on the MLS service, we will electronically advance from our bank account, directly to the agent's bank account, a portion of the commission that the agent would normally receive upon the final closing of the sale. Upon the transfer of title and final closing of the residential property sale the commission paid by the vendor that would normally have been paid to the agent is now paid to us to repay the loan, interest, and other fees or charges on said loan.

At the present time, we are only considering agreeing to situations that would involve Ten Thousand Dollars or less, however, once we have our feet wet in this business it is very conceivable that situations will arise that will involve more than Ten Thousand Dollars. As well, in the future we may also start to deal with other types of real estate transactions.

Answer:

Based on that information, this entity is not engaged in the business of wiring and therefore, is not an MSB.

Date answered: 2009-01-27

PI Number: PI-4507

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

When a person receives an incoming EFT from an MSB (usually at their agent) if they don't want to be paid in cash the receiver can elect to have the agent issue a cheque off of MSB's account. The client is then going to an entity to cash the cheque. Would this count as covered activity as it really is cheque cashing?

Answer:

Cheque cashing it is - thus with the facts at hand of course would not be in the business of money services.

Date answered: 2009-01-05

PI Number: PI-4480

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

B8 - dwelling house information

Question:

We sent a CR (change request) on B8 (dwelling house) because we believed that they operate from a commercial building. They say that all their records are kept at their home, and they often take business calls from home as well, in addition to his commercial location. Does this mean that he will need to answer that he does operate from a dwelling house?

Answer:

It would be a question of fact to determine if the dwelling house should be registered or not (as a branch).

It could be that although the MSB does have a principal business location, the branch would be his dwelling house. The question that needs to be asked to the MSB owner is the following: Does he do business at his dwelling house (e.g. such as business calls, transactions etc.). If so, then he should list the dwelling house as a branch. Or does he do all his business from the dwelling house (and then the house would be his main business location).

If on the other hand, he only keeps records at his dwelling house (and doesn't conduct any business from the house), then the dwelling house would not need to be registered as a branch. Again it is all a question of fact.

Date answered: 2009-01-05

PI Number: PI-4478

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 6C

Covered or not

Question:

Would this activity be covered under the legislation..

Example:

  • A ticket company has a contract with the charitable entity to sell tickets for a charitable event (for example dinner galas).
  • Individuals who want to buy tickets to charitable events purchase the ticket through the ticket company.
  • The ticket company is unable to process the payments because it is in a different currency.
  • The ticket company signs an agreement with an entity, whereby the ticket company provides the payment processing information to the entity so that the entity can process the payments.
  • The entity processes the transactions from the individuals and then gives the payment to the ticket company. Both a FX transaction and EFT would occur at this stage.
  • The ticket company then gives the charitable entity the funds.
  • In this example, the ticket company, the charities, and the individuals are in most cases all located outside of Canada.

Is this considered payment processing or EFTs and FX? Please let me know what you think and what obligations if any they have for KYC.

The entity said they would be able to get KYC info on the ticket company and limited documentation on the charities, but only transaction information for the individuals. They want to know what are their obligations before signing a contract with the ticket company.

Answer:

  1. At first glance the entity does mostly payment processing (activity that would not qualify the entity as being engaged in the money services business).
     
  2. However, the entity also does foreign exchange - therefore because of that component (i.e. fx) the entity is engaged in the money services business and would need to register as a MSB.

Date answered: 2008-12-17

PI Number: PI-4472

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not

Question:

A company has two business divisions:

  1. Gift Card - Internet use only prepaid cards (or in-house value cards). No cash value and not convertible backwards.
     
  2. Cheque Payment services for Merchants. We manage payouts for affiliates on behalf of internet merchants and pay via cheque (in exchange for service fees).

Are they required to register with FINTRAC?

Answer:

Based on the information you provided, it would seem that this entity is not engaged in the money services business.

However, we would suggest that you may want to enquire a bit more in the activities indicated in point #2 "manage payouts for affiliates" - just in case the list of merchants/affiliates is actually more than just cheque payment services for a line of business or part of the business, and is a disguised money services business.

Date answered: 2008-12-17

PI Number: PI-4471

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Redemption of Money Orders and Traveller's Cheques

Question:

An entity that wants to register because they have been told by their bank they must register to keep an account. The company is not an agent of an MSB, but he offers his small town the ability to cash Money Orders and Traveller's Cheques.

The scenario is the customer goes to him with the product, he exchanges it for cash, and then deposits it with his bank.

Would this activity be covered? Is this considered redeeming the product?

Answer:

Redeeming money orders to make a purchase is not covered (as the money order is like a cash instrument) . However, if the entity is engaged in the business of redeeming money orders - then under section 5(h) of the Act, you are in the money services business - so covered by our legislation.

Date answered: 2008-12-01

PI Number: PI-4465

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Covered or not covered for an online pay day company

Question:

The company that is being started is an online pay day company. They receive instructions from an employer (cheque #, bank account #, amount, payee info, etc.) and the day of the pay (one - two minutes after midnight), they transfer the funds (direct deposit) to the payee's account.

They will not have a physical location - online only. No F/X or issuing or redeeming traveller's cheques or money orders. The only wire transfers are for the purpose of direct deposit.

They want to know if they had any legal obligations to FINTRAC.

Answer:

It would be a question of fact. However based on the information that we were provided, if it is a payroll company per se, and if we are sure that it is only wire transfers for the purpose of direct deposits of pay - from an employer... then based on that we do not believe that this company would be considered as being in the business of money services. Therefore would not have to register.

Date answered: 2008-11-19

PI Number: PI-4407

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Defining Agents relationship

Question:

Here is the situation:

  • Our client maintains their own automated systems and databases, as well as data/software connections with identity verification services
     
  • Our client maintains all of their own settlement and financial bank accounts. The registered MSB has no custody or authority over any funds. Payment services never transit through any of the MSB's-controlled account(s).
     
  • designated personnel of the registered MSB will have access to our client's system, including its databases, via secured interfaces in order to provide our contracted services
     
  • the registered MSB's contracted services to our client include: CUSTOMER CARE, SUSPICIOUS TRANSACTION MONITORING, and AMLTF IDENTITY DATA VERFICATION and reporting services
     
  • In some % of cases, client identity verification and client record keeping will be handled in a completely automated fashion, by the client's systems that are in place. In some % of cases, the registered MSB's personnel will need to augment the automated client's automated systems in order to verify client identity (for example, via paper or face-to-face record exchange).

Both the registered MSB and our client would like to ensure transparency and accuracy with respect to our separate and joint regulatory submissions. I request some guidance here, as this situation seems to be a bit of a non-perfect fit for FINTRAC's Guideline 6C: Section 4.6: the registered MSB does not 'hold' client records (they are always on our client's systems and under client control), nor do we ever identify ourselves to customers as the entity with whom they are entering into a relationship. But our staff will be making the determination of identity and collecting information on behalf of our client in many day-to-day situations. We are in effect acting as a turn-key outsourced operations centre for our client, who maintains their own supervisory compliance and treasury oversight officers.

Does this qualify as a mandatary? In MSB Registration Part C1 requires them to list their agents and mandatories, but I have always been under the opinion they have to list agents that perform transactions, do they also have to list agents that ID clients?

Answer:

  1. In Part C1 of the MSB registration, the MSB would list the agents and mandataries that perform the money services business activities on their behalf (Fx, and/or wiring etc..).

    Unfortunately, our legislation uses the same term "agent" to refer to the individual or entity that a reporting entity may rely on to ascertain the identity of a client on its behalf (as per an agreement to that effect). This use of the same term is somewhat misleading and that type of agent should not be listed within Part C1 of the MSB registration.
     

  2. In regards to ABC Inc. specifically, based on the information that they have provided as to the services they offer, ABC Inc. would not be considered as a MSB. Therefore, they do not have obligations under our legislation. Again, however, this interpretation is based on the below-noted services listed, should they offer other types of services, it would be a question of fact to determine if they are a MSB or not.

Date answered: 2008-10-29

PI Number: PI-4387

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 6C, FIN-1

Regulations: 64.1(1)

Act: 5(h), 11.12

MSB Field B5

Question:

Should a request for clarification be sent to MSBs if field B5 is missing? Furthermore, should it be considered a cause for revocation if it goes unanswered (after the 30 days)?

Answer:

The regulations indicate in Schedule 1, Part B, section 10 that the applicant needs to provide the name and address of every Canadian MSB used by them to conduct transactions, as well as include the registration number issued to that MSB by the Centre.

Consequently, if the applicant does not provide that number, he would be in contravention with our regulations.

Having said this, administratively, we may chose not to request a clarification, should the applicant omit to provide that number - in other words we may decide not to send a letter of clarification for that information and fill out the missing information ourselves.

Date answered: 2008-10-08

PI Number: PI-4375

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Regulations: Schedule 1- Part B

Act: 11.14

Mobile MSB services

Question:

Another company coming forward for our opinion on whether or not they are an MSB. This is a company that will offer EFTs (and other services) through mobile phones. From their description I believe that some of what they offer would classify them as an MSB. I think in the future we will see more companies coming forward that offer mobile services as this modus operandi becomes more popular throughout the world.

Answer:

Yes you are right. We read the description of their activities, section 2.6 reads that this company will provide the consumer the ability to send money to or request money from another user on their Platform. This part definitely is a MSB activity under 5(h) of our Act.

Therefore, based on the document provided, this company is engaged in a money services business activity (wiring), so this company will have to register as a MSB, and the wiring activity will be covered (and any other activity that falls within the 5(h) list).

Date answered: 2008-10-06

PI Number: PI-4371

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Act: 5(h)

Mobile Branches

Question:

I have an MSB who is registered, but would like to enter in a branch location. For this field, the address is mandatory, however the branch of this business is mobile (he goes to the client's house, and performs the wiring from there). As such, there is no permanent location for this "branch". How should we treat this circumstance? Which address would be required for him to fill out, if any?

Answer:

Unfortunately, because it is not a fixed permanent address (as it changes with the client), the MSB cannot enter a "mobile" location as a branch. The MSB will have to provide his main address of business (in this case it may be his residential address?).

Date answered: 2008-09-19

PI Number: PI-4353

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: Schedule 1- Part A PCMLTFRR

Covered or not

Question:

Is a business conducting less than $100/month in foreign currency qualified as an MSB?

Answer:

Based on the information provided, I don't believe he qualifies as a MSB (due to the very small amount of the transaction/month and the fact that he does not seem to be in the business per se of foreign exchange).

However, if this business is engaged in other transactions and or activities such as the ones enumerated in FIN #1, then we would have to reconsider our response.

Here are additional criteria in regards to determining if the business is a MSB:

You own or operate a business and you offer money transfer services in any amount.

Your business issues or redeems money orders, travellers' cheques or other similar negotiable instruments for more than $10,000 during a single transaction with the same individual or entity. For these purposes, a single transaction is defined as two or more transactions related to the redemption of money orders, travellers' cheques or other similar negotiable instruments of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more.
Your business conducts foreign exchange transactions for more than $10,000 during a single transaction with the same individual or entity. For these purposes, a single transaction is defined as two or more transactions related to a foreign exchange transaction of less than $10,000 each that are made within 24 consecutive hours and that total $10,000 or more.

You advertise (by means of newspaper, television, yellow pages, internet, any other media, or by an interior or exterior sign) the fact that you engage in any of the above-mentioned money services business activities.

You hold a permit or license related to any of the above-mentioned money services business activities.

You are registered as someone carrying on any of the above-mentioned money services business activities.

You report the income of any of the above-mentioned money services business activities as income from a separate business for tax purposes.

Date answered: 2008-09-05

PI Number: PI-4330

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: 6C, FIN-1

Regulations: 3

Act: 5(h)

Online money transfer businesses

Question:

I have business that allows clients to sign up online and load money into their electronic "wallet" using credit cards, debit, wire transfers, money orders and certified cheques. Once the money is loaded onto their account, they can then send it to other individuals who also have an account with this company. Would we consider this to be an MSB?

Answer:

If they have no real and substantial connection to Canada then it does not qualify as an MSB.

However, if ABC is incorporated in Canada, or has permanent employees in Canada that provide MSB services, or has agents in Canada, or provides MSB services through its own server located in Canada etc.. then this company would not be subjected to the Canadian PCMLTFA. The key thing here is to determine if the business has a substantive connection to Canada

Date answered: 2008-07-03

PI Number: PI-4251

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Microcredit companies under the PCMLTFA

Question:

Are we choosing to consider companies conducting microcredit development projects overseas as MSBs? I have a charitable organization called ABC which wires money from its contributors to grassroots organizations in developing countries to offer microcredit initiatives to the poor. Once the money is wired to the developing country, it is distributed to the participants as cash. Most of the participants are illiterate (and have no access to financial institutions) and thus they 'sign' for the money with their fingerprint. This organization deals with relatively large sums of money (at least on the Canadian end) as they offer many microcredit initiatives around the world. Because they are wiring money abroad and distributing it to others, it seems to me like a possible candidate.

Answer:

Based on the description you gave us of what this company does (which is lending money to developing countries), we do not believe that ABC is an MSB. ABC does not seem to be involved in any other activities, and is not in the business of wiring money, therefore, there are good indications that it does not qualify as a money service business.

Date answered: 2008-07-03

PI Number: PI-4250

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Payroll Companies

Question:

Do we consider payroll companies (companies which are wired funds from employers and subsequently wire them separately to employees) to be MSBs?

Answer:

As long as the payroll company operates within that parameter (which is receiving wired funds from the employer(s) and re-distributing the funds by wire to the employees) then no that company would not be considered as an MSB.

Date answered: 2008-06-26

PI Number: PI-4246

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Determination of an MSB

Question:

Would the following company be considered an MSB:

In every case, all transactions are booked directly between the user and the partner's computer system. Neither the company's computers nor the company's personnel nor the company's bank accounts are involved with the actual booking of any deal.

The company brand is present in the company's Cash and the company's Trade but the user agreement for each of these services clearly explains that the deals are booked with the partner, not the company. Since the client must accept those terms for a deal to be booked, they are aware that the company does not provide the service directly.

In every case, the company receives no funds from clients. Every transaction is always handled directly by the partner. The clients settle directly with the partner and the company has no involvement in that process.

The company has a revenue sharing arrangement with each of the partners whereby we are remunerated based on the volume of business done. The agreement is slightly different for each partner.

Answer:

You are correct this company is not an MSB (it just provides the IT services really and doesn't handle any funds).

Date answered: 2008-06-25

PI Number: PI-4242

Activity Sector(s): Money services businesses

Obligation(s): Money services businesses

Guidance: FIN-1

Regulations: 1(2)

Act: 5(h)

Date Modified: