Find out if your business meets Canada's MSB criteria under FINTRAC. Learn the requirements, types of services, and registration process.
If your business deals with currency exchange, money transfers, or virtual currencies, you may fall under Canada's definition of a Money Services Business (MSB). Determining whether your operations meet this classification is essential, as it directly affects your obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Failure to comply could result in regulatory penalties and reputational damage. This article provides a detailed, step-by-step guide to understanding MSB classification and compliance in Canada.
What Is a Money Services Business (MSB) in Canada?
A Money Services Business in Canada refers to any individual or entity that offers financial services such as foreign exchange dealing, money transferring, issuing or redeeming money orders or travelerās cheques, or dealing in virtual currencies. Under Canadian law, these businesses are subject to specific regulatory requirements enforced by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
MSBs are considered gatekeepers of the financial system and must implement robust anti-money laundering (AML) measures. These regulations are designed to protect the financial ecosystem from being exploited by criminal actors.
What Activities Qualify as a Money Services Business?
Several financial operations trigger MSB status. If your business conducts any of the following activities as a service to the public, it likely qualifies as an MSB:
Each of these activities, when conducted on a commercial scale or as a core business service, falls within the regulatory scope of FINTRAC and must comply with associated obligations.
A wide range of businesses and professional service providers in Canada are subject to MSB regulations due to the nature of their operations. These entities may not always operate as traditional financial institutions, but can still fall within the MSB framework under FINTRAC regulations.
Examples include:
It's also worth noting that businesses offering MSB-like services as a secondary feature, such as online marketplaces or investment platforms facilitating fund movement, may still be classified as MSBs if they perform qualifying functions. The determining factor is not the business label but the activity itself.
To assess whether your business qualifies as an MSB, consider the following:
FINTRAC evaluates businesses based on their functional activities, not their stated business model. Even if financial services are a secondary feature, you may still be required to register and comply.
If youāre unsure about your status, you may want to outsource AML compliance to professionals who can assess your operations and determine whether registration is mandatory.
Registration is mandatory for MSBs operating in Canada. Hereās how to complete the process:
Once submitted, FINTRAC will review your application. Youāll be issued an MSB registration number upon approval. Keep in mind that registration is not a one-time task. You are required to maintain your profile and renew your registration every two years.
Once registered, MSBs must adhere to a robust set of obligations, including but not limited to:
Annual compliance reviews are also required. As part of your AML Compliance for MSBs, your review should cover:
Failure to meet these obligations can lead to FINTRAC fines, some of which can reach into six figures depending on the nature and frequency of non-compliance.
A common misconception is that businesses with minimal financial activity or those acting as agents for registered MSBs are exempt. However, FINTRAC assesses qualification based on functional roles, not assumptions.
For instance, a business facilitating currency exchange on behalf of another company may still require registration unless it is truly operating as an employee or independent agent under a principal MSB. Similarly, a startup facilitating peer-to-peer transfers using crypto wallets could be considered an MSB depending on its infrastructure and customer interaction.
Since June 1, 2020, businesses dealing in virtual currencies are officially recognized as MSBs under Canadian law. This includes companies offering:
Crypto MSBs must follow the same compliance standards as traditional MSBs. That includes registration with FINTRAC at least, maintaining a compliance program, and reporting specific transaction types. This regulatory expansion reflects Canadaās commitment to closing gaps in financial transparency within the virtual asset sector.
Businesses unsure about their obligations should consider obtaining an MSB licence and working with professionals to ensure regulatory readiness.
Operating an unregistered MSB is a serious offense. FINTRAC can impose administrative monetary penalties and may publicize violations, impacting your business reputation.
Penalties vary based on the nature of non-compliance, the size of the business, and whether the breach is considered minor, significant, or very serious. In some cases, enforcement may include criminal referrals. Businesses that fail to register or do not file the required reports are subject to heightened scrutiny and enforcement actions.
Given the complex and evolving nature of MSB regulations, many businesses choose to engage experts. AML Incubator offers AML compliance services; AMLI professionals assist with assessing whether a business qualifies as an MSB, preparing compliance programs, training staff, and filing required reports with FINTRAC.
Whether you're launching a fintech startup, expanding your crypto exchange, or operating a traditional money transfer service, consulting experienced AML professionals can help mitigate compliance risks and build long-term regulatory resilience.
AML Incubator. Don't just meet compliance standards - set them.
Contact: Hello@amlincubator.com