🏦 Should You Buy a Shelf MSB? 🏦

Many of our clients have approached us after purchasing a shelf MSB (Money Services Business). While this can make sense in certain situations, the cost of purchasing a shelf MSB is often 4-10x more expensive than having AML Incubator register one for you! 💸 If you're quoted more than $30,000 for a shelf MSB, consider speaking to us for a free consultation before making a decision.
What is a Shelf MSB? 🤔

In Canada, a "shelf MSB" refers to a company that has been established and registered as an MSB but has not yet commenced operations. The term "shelf" implies that the business is ready for purchase by someone who wants to start an MSB without going through the registration process themselves.

While buying a shelf MSB has its benefits, there are risks and drawbacks you need to be aware of. Let’s dive into a few key reasons why you might reconsider purchasing a shelf MSB.

🚨 Risks to Consider Before Buying a Shelf MSB

1. Enhanced Regulatory Scrutiny 🔍
Since late 2021, FINTRAC has made it clear that MSBs should only register if they plan to operate within 30 days or need registration for banking access. As a result, there has been a significant increase in MSB revocations—86 since this stance was taken—many of which were revoked for exactly this reason.

To make things even stricter, upcoming regulatory amendments will give FINTRAC even more power, including the ability to issue Administrative Monetary Penalties for non-compliance. 😬

2. Hidden “Gotchas” 💥
Buying a shelf MSB could come with undisclosed financial responsibilities, unresolved legal issues, or previous regulatory problems. These hidden issues could be passed on to you, potentially including expensive contracts with banking partners or third-party providers for AML/ATF services.

3. Unfavorable Perceptions 🤨
A new MSB already faces trust challenges with banks, customers, and business partners. Now imagine trying to explain that you purchased a shelf MSB. Many stakeholders perceive shelf MSBs negatively, associating them with attempts to evade regulatory scrutiny or a lack of transparency. This can damage your credibility right from the start. 🚫

4. Personalization and Proper Sizing 🧩
A shelf MSB may not fully align with your company’s needs, leading to additional costs and time spent adjusting it, updating the FINTRAC registration, or modifying the AML/ATF program to suit your actual business model. This can also raise red flags with FINTRAC, especially when there are changes in ownership, business models, or operations. ⚠️

📅 The Bigger Picture: Regulatory Changes Coming Soon
It’s important to remember that scrutiny will increase even more when the Bank of Canada starts enforcing the Retail Payments Activities Act on November 1, 2024, with full enactment on September 8, 2025. On top of that, you’ll also need to navigate the provincial regulators like Revenu Québec and, soon, the BC regulator.

🔑 Bottom Line: There’s no substitute for doing things right the first time. Soon, there won’t be any second chances.
💬 Have Questions? We’re Here to Help!

Considering a shelf MSB? Let’s chat! Book a free consultation with AML Incubator, and let us guide you through the process.

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