Canada MSB, an alternative to European EMI license
Money Service Business (MSB) license
Setting up your Fintech project
To launch your fintech project and provide payment services you need permission or authorisation to perform these operations.
Canadian Money Services Business (MSB) license is one of the several options you can decide for, to register your payment business and start operating immediately. Obtaining an EMI license in any of the EU countries or in the UK is a very long and expensive process; it can take over 12 up to 18 months. At least you will need 3 to 4 months to prepare documents, 9 to 12 months to get authorisation from the regulator, 4 to 6 months to actually launch your basic fintech infrastructure. Reason why new entrepreneurs are usually forced to look for alternative options to start a fintech company – faster than obtaining an authorised PI or EMI license.
There are several options, including to operate as an agent under the umbrella of a licensed provider, to register as a small payment institution or, as a 3rd option, applying for a Canadian Money Services Business (MSB) license.
What is a Canadian MSB license?
This is a registration in a special register of businesses providing payment services, which is maintained by the Canadian regulator, the Financial Transactions and Reports Analysis Centre of Canada – FINTRAC, Canada’s financial intelligence unit (FIU). The Centre assists in the detection, prevention and deterrence of money laundering and the financing of terrorist activities.
Money Services Business (MSBs) must fulfil specific obligations as required by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations, to help combat money laundering and terrorist activity financing in Canada.
MSB activities permitted by FINTRAC
If you work in the money services business (MSB), you need to know about all
the obligations that apply to you. This includes the registration of your business,
reporting, record maintenance, knowing your customers and having a
compliance program.
You are a money services business (MSB) if all of the following criteria apply:
- You offer at least one money services business (MSB) service
- You have a place of business in Canada
Latest MSB activities permitted by FINTRAC
Foreign exchange dealing
Conducting transactions where you exchange one type of currency for another
(for example, exchanging USD for CAD).
Money transferring
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 Chitti
Merchant acquiring
Enable your clients to accept card payments via a POS terminal or an online
payment gateway page.
Dealing in virtual currencies
This includes both virtual currency exchange and virtual currency transfer
services.
- Virtual currency exchange services include exchanging:
- funds for virtual currency,
- virtual currency for funds, or
- virtual currency for another virtual currency.
- Virtual currency transfer services include:
- transferring virtual currency at the request of a client, or
- receiving a transfer of virtual currency for remittance to a
beneficiary.
The new legislation in Canada, which came into force in early June 2020, has
opened the green light for crypto-exchanges, as well as for payment operators
dealing with crypto-currencies. Now, these organizations are officially classified
as the financial service providers.
Crowdfunding platform
Crowdfunding platform services include the provision and maintenance of a
crowdfunding platform for use by other persons or entities to raise funds or
virtual currency for themselves or for persons or entities specified by them.
Payment service provider
Includes enabling the transfer of funds carried out as payment for the provision
of goods and services, such as by debit, credit card, or a prepaid payment
product.
The MSB license activities permission also includes, besides card issuing, IBAN account opening. So basically it can work as an online bank for money transfers + crypto activities.
The MSB can passport its services to the whole EU, in regards to the Canada-EU trade agreement.
Benefits of MSB license in Canada
The primary Advantages and Benefits of acquiring an MSB License in Canada
Canada is recognized as one of the world’s most stable economies, boasting a diverse range of fintech companies thriving within a regulatory environment conducive to business. With stringent financial regulations, a culture of ongoing innovation, and a plethora of sales avenues, Canadian enterprises embody excellence in the financial sector.
Outlined below are the primary advantages and benefits of acquiring MSB licenses in Canada:
Ensuring Legal Compliance
Every financial service organization operating in Canada must secure an MSB license to operate within the bounds of the law. Obtaining these licenses guarantees legal operation, ensuring adherence to regulatory standards and compliance with applicable laws.
No Capital Deposit Required
In contrast to licensing requirements in other jurisdictions, the Canadian MSB licensing process doesn’t necessitate a minimum authorized capital. Typically, the process involves company registration, appointing an anti-money laundering officer, and selecting a director.
No Mandatory Physical Establishment or Staff
Similarly, unlike some other jurisdictions, there’s no obligation for a physical business location or staff members (except for a compliance officer).
Offering Fiat and Crypto Services
The Canadian MSB license permits the provision of services in both traditional fiat currency and cryptocurrencies. This stands in contrast to Europe, where separate licenses are typically required for fiat and cryptocurrency transactions.
Enhanced Credibility in Financial Partnerships
Establishing partnerships with banks, payment processors, and networks is crucial in the financial landscape. Holding an MSB license enhances credibility, facilitating smoother negotiations and collaborations with these entities. It demonstrates a commitment to regulatory compliance and financial stability, making the licensed entity a more desirable partner.
Efficient Licensing Process
Compared to European counterparts, the MSB licensing process in Canada is relatively expedient. The timeframe typically ranges from two to five months, depending on document submission. This efficiency is further underscored by the quick registration process with the BC registrar (1-2 days) and approval from FINTRAC (1-2 weeks).
Reputation for Reliability
Canada’s financial sector is esteemed for its safety, stability, and reliability, thanks to robust banking institutions. This solid foundation, coupled with ongoing innovation, fosters a secure and trustworthy business environment.
Versatility
The MSB license in Canada enables license holders to engage in various services, including foreign exchange transactions, fund remittance, money order issuance, virtual currency trading, and crowdfunding facilitation. This versatility appeals to business owners, offering flexibility for diverse strategies and attracting potential investors.
Requirements for MSB application
Company name
Must contain at least two words, one of them should describe the main business activity of the company, for example, “payments”, “remittance” etc. Abbreviations are not accepted.
Registered address
Capital
Management
At least one director private person with experience in the financial sphere has to be appointed at the stage of incorporation, and a qualified compliance officer as well as a sound AML/CFT program and compliance system should be appointed and in place at the stage of starting operational activity of the company. Directors and AML responsible people do not have to be local if the company is registered in British Columbia or Ontario.
Ownership
Compliance reporting
How to register and run the Money Services Business?
Time scale
Step 1
Client Due Diligence
Gathering basic information; providing a preliminary set of documents for further execution; clarity on project scope and budgets.
- Expected time scale: up to 2 weeks
- Inclusions:
- Preliminary project analysis
- KYC collection and business description
- AML/CTF policy preparation
Step 2
Registering a business in Canada
You can choose any province to set up a company. For non-residents, British Columbia is the most suitable option.
Company registered under the approved name and its legal address.
- Expected time scale: 4 to 6 weeks
- Inclusions:
- Choose company name
- Rent an office and sign an agreement
- Determine share capital
- Prepare a set of notarised corporate documents
- Appoint employees with financial expertise
Step 3
Opening a bank account
A corporate account is opened, and the entity complies with the requirements of the tax authorities.
Company registered under the approved name and its legal address.
- Expected time scale: 4 to 5 weeks
- Inclusions:
- Preparation of notarized documents
- Preliminary talks with the payment institution and the account opening process
- Payment of share capital
Step 4
Pre-application work and registration
Submitting documents for an MSB license. A functioning company in the legal framework of Canada.
- Expected time scale: up to 2 weeks
- Inclusions:
- Preparing and adapting documents for AML/CTF cryptocurrency company operations
- Search, employment, training, and adaptation of employees
- Submission of license application
- Collecting additional documentation as requested by the FinTRAC representative
- Negotiating with FinTRAC representative
- Compliance with FinTRAC representative requirements
Step 5
Registration process (unless a clarification request was sent to the applicant following the submission)
Obtaining an MSB license and the appearance of the company in the registry of licenses.
Company registered under the approved name and its legal address.
- Expected time scale: up to 4 weeks
- Inclusions:
- Submitting the documents to FINTRAC
- Leading the Client and conducting negotiations with the regulator and full support during the entire process until the registration is accomplished
Our services
Project management
This service assures our support and guidance throughout the process of obtaining your MSB registration approval, including the setup of a new company in Canada in any of the 10 Canadian provinces, except Quebec (which requires a separate and distinct registration with the AMF). A member of the Pay Compliance team will be present at the FINTRAC interview and help guide you through the process. One of the main advantages to acquiring a Canadian MSB license is the short licensing process (3-4 months).
Corporate concierge
From corporate changes to certifications to authorisations to reports – we will deal with every local requirement for you, so that you can focus on the operations.
Compliance support
We will provide a full compliance support to you including design/upgrade of policies, procedures, questionnaires, and forms to meet regulatory requirements; support client on-boarding, AML and KYC checks; liaise with regulators during regulatory examinations, investigations, and post examination remediation; Ad hoc compliance advice, regular compliance reviews, personalised one-to-one training, handling of all correspondence and statutory filings with regulators.
Compliance programme
Comply with the Canadian regulation, a compliance program must be put in place for your company, which will be reviewed by FINTRAC. We can offer a written AML/CFT compliance program that meets Canadian and international standards customised for your business operations.
Risk assessment
We will prepare your risk assessment by considering elements of your business, clients and/or business relationships to identify the impact of possible ML/TF risks, and to apply controls and measures to mitigate these risks.
Clear banking
We will prepare your risk assessment by considering elements of your business, clients and/or business relationships to identify the impact of possible ML/TF risks, and to apply controls and measures to mitigate these risks.
Compliance officer recruitment
As all companies require a Compliance Officer, we will offer support in connecting clients with qualified and experienced candidates who will be equipped with the necessary knowledge about the Act and its associated regulations to ensure that your business remains compliant.
Our company licensing services
— What we do and do not do
Our company is EXCLUSIVELY engaged in assisting worldwide clients, either individuals or corporate entities, to get duly and properly licensed with local Regulators and Financial Authorities to get respective official licenses to legally carry out their cryptocurrency or financial related business activities.
TBA & Associates Tax Business Advisors does not provide or carry out any sort of Cryptocurrency or Financial services!
Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.