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What is the difference between a money services business MSB and a payment service provider, and what the definition is for each? The reporting entity sectors are identified in section 5 of the PCMLTFA and include accountants, British Columbia notaries, casinos, dealers in precious metals and stones, life insurance companies, life insurance brokers and agents, real estate agents or brokers, real estate developers, securities dealers, financial entities, and MSBs.
Therefore, a payment service provider is only subject to the obligations and requirements outlined in the PCMLTFA and its associated Regulations when it meets the definition of one of the reporting entity sectors such as an MSB, or possibly a financial entity. The reason for this is 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.
Similarly, depending on the business model provided by a person or entity, FINTRAC has taken the position that those engaged in the business of providing settlements directly to merchants on behalf of their customers, for the purchase of goods and services, are not considered to be MSBs as the transfer of funds is performed only as a result of the payment services offered. It will always be a question of fact to determine whether a person or entity is engaged as an MSB in Canada.
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? 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.
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. 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?
In particular, the MSB must provide:. 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. The reporting entity may consider using the license plate or vehicle details as identifiers in the registration form.
How much is a customer allowed to send and is it mandatory to get a customer's signature when conducting a transaction? 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.
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? 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. Is Jerry an MSB? You are an MSB if you are engaged in the business of any of the following activities:.
In either case, that person or entity may be assessed penalties or incur other consequences. Could you clarify the registration requirements for money services businesses MSBs in Canada? 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.
There is no requirement that these reports be submitted from within Canada. We would like to offer escrow services to charities. As such, you cannot register with us. 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.
The criteria considered to establish a real and substantial connection include if the business:. Additionally, your company will maintain a bank account in Canada, thus establishing a real and substantial connection.
To further clarify, you asked whether your company would be considered an MSB as a result of the following summarized scenarios:. 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. 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. 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. 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.
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. 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. 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.
It is therefore only those businesses that engage in the specific services identified above that may be considered as offering payment processing services. 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. 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.
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. We have incorporated a Canadian entity.
How does the creation of this entity affect our currently registered MSB? 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. 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. 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. 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.
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. 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. 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 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.
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. 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. The repayment schedule will be visible under their campaign page for all users to see as they make payments. 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. 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.
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.
This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime.