Who has to register
Any business that falls within the definition of a money services business under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act must register with FINTRAC. That includes businesses that deal in foreign exchange, remit or transmit funds, issue or redeem money orders and similar instruments, deal in virtual currency, provide crowdfunding platform services or transport currency by armoured car. Foreign businesses that direct and provide these services to people in Canada must register as foreign MSBs.
Registration has to be in place before the business starts offering MSB services. Operating without registration is an offence, and FINTRAC actively looks for unregistered businesses, including through public complaints and its own monitoring.
A registered MSB must also tell FINTRAC if it stops carrying on MSB activities, and must keep its registration accurate for as long as it operates. The registration is tied to the business as a legal person, so a group with several operating companies will typically need a separate registration for each one that carries on MSB activity.
What the application involves
An application is made through FINTRAC's online system. It asks for detailed information about the business, its people and its operations. The broad categories are:
- Identity of the applicant: legal name, any operating or trade names, incorporation details, business numbers and the address of the head office or principal place of business.
- Activities: which MSB activities the business carries on, such as foreign exchange dealing, money transferring or virtual currency dealing.
- Locations and agents: branch locations in Canada and any agents or mandataries who provide services on the business's behalf.
- People: the compliance officer, the chief executive or equivalent, directors, and those who own or control the business.
- Banking: details of the financial institutions the business uses for its MSB activity.
- Online presence: websites and other channels through which services are offered.
The quality of the application matters. Inconsistent names, missing owners or an activity list that does not match the business model will lead to questions and delay, and may lead to refusal.
Who is not eligible
Registration is not a formality that anyone can obtain. The legislation makes certain persons and entities ineligible to register. In general terms, this includes businesses connected with individuals convicted of specified serious offences, including money laundering and terrorist financing offences and certain offences under drug laws, as well as entities listed as terrorist entities under the Criminal Code, and persons subject to particular sanctions.
FINTRAC can refuse an application where the applicant is ineligible, and it can revoke an existing registration where it later learns that the business has become ineligible or that the information provided was false or misleading. It can also revoke a registration where the business fails to respond to requests for information.
For applicants, the practical point is to be accurate and complete about who owns, controls and runs the business. Omissions discovered later are treated seriously, and the consequences can be far worse than the questions an honest disclosure might have raised at the start.
The information FINTRAC holds and publishes
Once registered, the business has a registration number and an entry on the public MSB registry on FINTRAC's website. The registry is designed so that clients, banks and other businesses can check that a provider is registered.
Not everything on the application is published. The public entry generally shows the legal name, operating names, registration number, the activities the business is registered for, its registration status, its address and its website. FINTRAC keeps the full application, including information about individuals, for its own supervisory purposes.
FINTRAC also receives a steady flow of reports from the business once it operates, including suspicious transaction reports, large cash transaction reports, large virtual currency transaction reports, electronic funds transfer reports and reports of property belonging to terrorist groups or other listed persons. Those reports are confidential. They feed FINTRAC's financial intelligence work and its supervision of the business, and none of them appear on the registry.
Where applications run into difficulty
Applications that stall usually do so for predictable reasons. Most of them are avoidable with some preparation before the form is opened.
- Activities that do not match the business. A firm that converts currency and then pays third parties carries on more than one activity. Registering for only one of them leaves a gap that an examiner will find.
- Incomplete ownership. Holding companies, trusts and nominee arrangements above the applicant need to be disclosed accurately. Naming only the immediate shareholder of a company owned through several layers invites questions.
- A compliance officer in name only. The person appointed should have the authority, time and knowledge to run the programme. A senior executive with no anti-money laundering background, appointed purely to fill the field, is a weakness that shows up quickly in an examination.
- Inconsistent details. Trade names, addresses and websites that differ between the application, corporate records and the business's own marketing create doubt about which entity is really offering the service.
- Slow responses. FINTRAC may ask follow-up questions. Leaving them unanswered can lead to the application being closed.
None of these problems is unusual, and none is fatal if addressed promptly. They are simply cheaper to avoid than to fix.
Keeping the registration current
A registration is only useful if it is accurate. A registered MSB must notify FINTRAC of changes to the information in its registration within the period the regulations set. Typical changes include:
- A new operating name or a new website.
- A change of address for the head office or a branch.
- A new compliance officer, chief executive or director.
- A change in ownership or control.
- Starting or stopping an MSB activity, for example adding virtual currency dealing to an existing foreign exchange business.
- New agents or mandataries, or the end of an agency relationship.
Some changes are minor. Others, such as a new controlling shareholder, can raise eligibility questions and should be planned with the registration in mind. A business that adds a new service before updating its registration risks offering an activity it is not registered for, which is a compliance failure in its own right.
Renewal every two years
MSB registration does not last indefinitely. It must be renewed every two years. The business submits a renewal application before the current registration expires, confirming or updating the information FINTRAC holds.
If a registration lapses, the business is no longer registered and must stop offering MSB services until it registers again. The public registry will show the change in status. For clients, an expired registration is a clear warning. It may reflect an administrative oversight, but it may also reflect a business that has stopped operating or is in difficulty.
Renewal is also a useful internal checkpoint. Well-run MSBs treat it as an occasion to reconcile the registration against reality: the activities they actually carry out, the people who actually run the compliance function, and the agents and banks they actually use. Any gaps found should be fixed and reported, not carried forward to the next cycle.
Supervision after registration
Registration is the start of a supervisory relationship. FINTRAC conducts compliance examinations of reporting entities, which can be desk reviews or on-site visits. Examiners look at the compliance programme, the risk assessment, client identification files, record keeping, training records, the two-year effectiveness review and the quality and timeliness of reporting.
Where FINTRAC finds deficiencies, it can require the business to put things right and may impose administrative monetary penalties. FINTRAC publishes information about penalties it has imposed, so serious failings can become a matter of public record. In more serious cases involving criminal conduct, matters can be referred to law enforcement.
FINTRAC is not a prudential regulator. It does not supervise capital, liquidity or the financial soundness of MSBs in the way that a banking supervisor does. Its focus is on compliance with the anti-money laundering and anti-terrorist financing framework.
What registration means for clients
Registration tells a client several useful things about a provider:
- The provider is known to FINTRAC and has disclosed its owners, management and activities.
- It is subject to the PCMLTFA and to FINTRAC examinations.
- It must run a compliance programme and report certain transactions.
- Its status can be checked independently on the public registry at any time.
Those are meaningful facts. Many banks will not provide services to an MSB that cannot show current registration, and counterparties often ask for the registration number during their own due diligence.
What registration does not mean
Registration has limits, and a provider that overstates it is a provider to be wary of. Registration does not mean that:
- FINTRAC endorses, recommends or guarantees the provider or its services.
- The provider is a bank, or holds client money under a banking licence.
- Client balances are protected by deposit insurance.
- The provider has been assessed for financial strength or solvency.
- The provider is authorised to operate in any country other than Canada.
Marketing that describes an MSB as licensed by FINTRAC in a way that implies more than registration should be read with care. The accurate description is registered with FINTRAC as a money services business. Clients should combine a registry check with their own commercial due diligence on the provider's ownership, banking relationships and handling of funds in transit.
Before you act
This article is general information about FINTRAC registration. It is not legal advice, and businesses considering whether they need to register should take advice from a Canadian lawyer.
Registration requirements, reporting forms and registry fields are updated from time to time, so check FINTRAC’s own guidance for the current position. Our compliance page sets out the CCYFX approach to compliance.
