MSB License of Canada
The establishment of an MSB in Canada requires acquiring a specific license from FINTRAC,
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Money Service Business (MSB) license
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.
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.
Canada is known for having one of the world’s most stable economies, offering a favorable environment for fintech companies to operate. With strong financial regulations, ongoing innovation, and various sales channels, Canadian businesses thrive in this supportive climate.
The country’s flexible government requirements for financial service companies, adherence to global regulatory standards, and strong legal protection make Canada an appealing choice for businesses.
TBA & Associates offers expert assistance in obtaining a Canadian MSB license through a turnkey solution, ensuring:
A fast time-to-market (just three months)
A regulator supportive of international operations
Minimal local presence requirements
Financial businesses serving customers must comply with Canadian law to aid the government in detecting criminal activities and fighting money laundering.
Foreign Exchange Dealing
Involves conducting transactions where one currency is exchanged for another (e.g., converting USD to CAD).
Money Transfer
Facilitates the transfer of funds from one individual or organization to another through electronic funds transfer networks or other methods.
Merchant Acquiring
Allows businesses to accept card payments, either through a POS terminal or an online payment gateway.
Dealing in Virtual Currencies
This covers both virtual currency exchange and transfer services.
Virtual currency exchange services involve:
Exchanging funds for virtual currency,
Converting virtual currency into funds, or
Trading one virtual currency for another.
Virtual currency transfer services include:
Transferring virtual currency on behalf of a client, or
Receiving a virtual currency transfer to remit to a designated recipient.
With new Canadian legislation that took effect in June 2020, cryptocurrency exchanges and payment operators dealing in cryptocurrencies are now officially recognized as financial service providers.
Crowdfunding Platform
These services involve providing and maintaining a platform for individuals or entities to raise funds or virtual currency for themselves or others.
Payment Service Provider
Facilitates the transfer of funds for the payment of goods or services, typically through debit, credit card, or prepaid payment products.
The MSB license also grants permission for activities such as card issuing and IBAN account opening, effectively functioning as an online bank for money transfers and cryptocurrency services.
Thanks to the Canada-EU trade agreement, MSBs can also extend their services across the entire EU.
In Canada, two types of financial businesses are required to comply with the obligations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA): Foreign Money Service Businesses (FMSBs) and Money Service Businesses (MSBs).
An FMSB is a non-bank financial institution that offers financial services and operates outside of Canada, whereas an MSB provides financial services within Canada. Both types of businesses must register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and adhere to the reporting and recordkeeping requirements set out by the PCMLTFA.
A business qualifies as a Money Services Business (MSB) if it meets the following criteria:
It offers clients at least one MSB service, such as: currency exchange; transactions involving currency conversion; transferring funds, including through bank card transfers; facilitating financial transfers between individuals or entities; or acting as an intermediary between a payer and payee for payments related to bills, wages, loans, mortgages, utilities, etc. (excluding accepting payments on behalf of the payee solely for debt repayment with payment instructions directed to a third party).
It issues or redeems money orders, traveler’s checks, or other similar negotiable instruments (excluding cashing checks for specific individuals or merely selling traveler’s checks issued by another company).
It provides virtual currency services, such as exchanging fiat currency for virtual currency, exchanging one virtual currency for another, transferring or receiving virtual currency, or offering or managing a crowdfunding platform to raise funds or virtual currency.
It operates in Canada, has a physical office in the country, employs staff or agents in Canada, or has established a branch office within Canada.
A business is classified as a Foreign Money Services Business (FMSB) if it meets the following criteria:
You offer any services that qualify as those provided by a Money Services Business (MSB), but with the following distinctions:
You do not have a physical presence in Canada—this means no Canadian registration, no office, and no employees, agents, or affiliates located in Canada.
Your business provides services to individuals or entities in Canada, which may result from activities such as: marketing or advertising specifically aimed at Canadian clients, managing a “.ca” domain, or being listed in a Canadian business directory.
If your company serves customers in Canada, it is determined by factors such as: the customer’s residential address, documents issued by the Canadian government, Canadian bank-issued cards, or if the customer is temporarily living, working, studying, or vacationing in Canada.
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.
