FINTRAC's Authority and Expectations for MSBs

Canadian Money Services Businesses (MSBs) should be aware of their Anti-Money Laundering (AML) responsibilities as the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) increases internal compliance investigation efforts.

FINTRAC is not only stepping up investigations—certain businesses will notice a sudden uptick in reporting requests—but it also has new compliance expectations for MSBs. These came into force with the Retail Payment Activities Act (RPAA).

The easiest way to avoid scrutiny is to build a culture of compliance from the ground up. This includes knowing the top money laundering red flags MSBs must watch for in 2025.

FINTRAC, Canada's financial intelligence agency, tracks and traces money flows to prevent money laundering and terrorist financing. MSBs registered with FINTRAC must comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) by conducting client due diligence, submitting reports, and keeping detailed records.

Failing to recognize or report suspicious activity can lead to fines, loss of banking access, reputational damage, or even criminal charges. You can view the full list of FINTRAC red flags here.

Universal Red Flags for MSBs

The following are the most common red flags to monitor. They should be embedded into your ongoing risk-based approach to AML compliance.

Client Identification and Transaction

Inconsistent or Suspicious Identification

• ID is forged, expired, or doesn’t appear to belong to the person presenting it.
• Clients cannot explain inconsistent or incorrect personal details.

Avoidant or Unwilling Behavior

• Refuses to provide required information during onboarding or transactions.
• Gives minimal responses or questions the need for basic AML information.

Unusual Client Behavior

• Appears nervous, rushed, or overly concerned about privacy.
• Engages third parties without explaining their relationship.

Patterns of Transactions and Activity

Structuring

• Breaks large amounts into smaller transactions to avoid Large Cash Transaction Reports (LCTRs) or Electronic Funds Transfer Reports (EFTRs).

Rapid Inflows and Outflows

• Quickly deposits and withdraws funds without a legitimate business explanation.

Suspicious Transaction Volumes

• Sudden increase in activity or unusual frequency that doesn’t match the client’s profile.

International Transactions from High-Risk Jurisdictions

• Deals involving clients from non-compliant or high-risk countries, as flagged by FATF.

No Business Relationship with Country of Transaction

• Cross-border transactions involving jurisdictions where the client has no personal or commercial ties.

Product and Service Misuse

Prepaid Card and Money Order Abuse

• Purchases high-value prepaid services or money orders without clear intent to use them legitimately.

MSB as a Lender

• Requests loans or financing unrelated to the MSB’s designated services.

The Risk-Based Approach and Red Flag Response

The risk-based approach requires MSBs to assess the risk level of their clients, services, and business models—and respond proportionally.

If a client presents a red flag, this doesn’t automatically imply criminal intent. It means additional questions should be asked—or a Suspicious Transaction Report (STR) submitted to FINTRAC.

For high-risk clients or transactions, consider using our Enhanced Due Diligence (EDD) Services.

Want to dive deeper into what the risk-based approach means for your MSB? Read our blog:

👉 Why Must Canadian MSBs Utilize the Risk-Based Approach for AML Compliance?

Reporting and Record Keeping Obligations

Canadian MSBs must have internal controls to monitor and escalate suspicious activity. That includes:

Reporting Red Flags

• File an STR with FINTRAC any time a transaction seems inconsistent with the client's profile or could be linked to criminal activity.
• No minimum dollar threshold applies.

Recordkeeping Obligations

Keep records of:

• Client identity
• Business relationships
• Transaction receipts
• Beneficial ownership details

Not sure where your compliance gaps are? Get a full Effectiveness Review from AML Incubator.

Penalties for Failing to Address Red Flags

FINTRAC Fines and Public Naming

In 2024 and early 2025, FINTRAC stepped up enforcement by publicly naming non-compliant MSBs and levying large Administrative Monetary Penalties (AMPs).

If your MSB has been fined—or you fear it might be next—we offer Regulatory Remediation Services to help you recover and rebuild.

Public Reputation and Banking Access

Banks and payment processors are increasingly cautious. Weak AML programs can lead to:

• Denial of banking services
• Closure of existing accounts
• Loss of cross-border transfer capabilities

Explore our blog on the topic:

👉 MSB Registration in Canada - to 10 reasons

Red Flag Mitigation Best Practices

Train Your Staff

• Offer AML training focused on identifying red flags.
• Make sure frontline staff understand how and when to escalate.

Implement Strong Internal Controls

• Create structured escalation processes.
• Use monitoring software tailored to MSB activity.

Review AML Program Effectiveness

• Conduct regular internal and third-party audits.
• Our CAMLO/MLRO Services include routine oversight, documentation, and regulatory updates.

Stay Informed

• Monitor FINTRAC and RPAA developments.
• Subscribe to the AMLI blog for real-world AML insights.

Conclusion

Red flags are not just a checklist—they're a mindset. A proactive compliance culture protects your business and helps build credibility with regulators, partners, and clients alike.

Whether you're just starting your MSB Registration or responding to a regulatory investigation, AML Incubator is your trusted partner in regulatory excellence.

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