Canadian Money Service Businesses 101

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What is an MSB?

According to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), a money service business (MSB) pertains to a business that deals with transferring monterey values between different parties. 

For example, a business is an MSB if it deals with foreign exchange, money transferring, issuing money orders, and redeeming traveller’s cheques. Scheduled to come in full force in Canada on June 1, 2020, businesses dealing with virtual currency can be considered as MSBs as well. 

This paper provides what business owners need to know when it comes to whether or not a company is an MSB. Examples are also included in addition to what steps one should take in order to comply with the MSB policies set out by FINTRAC.

Firstly, a business may be an MSB if it deals with foreign exchange. This is in the form of exchanging one type of currency to another. An example of this would be converting and exchanging USD currency for CAD, or even exchanging EUR for CAD. 

It should be noted, however, that when an individual buys items with foreign currency, the action is not considered a foreign exchange. For instance, let’s say an individual enters a store and purchases coffee using a $20 USD bill. The individual then requests for their change to be in CAD. This type of transaction is not considered as foreign exchange. 

On the other hand, let’s say an individual has a $100 USD bill and a traveller’s cheque of $100 USD. A traveller’s cheque is a form of payment this is pre-printed and commonly issued by a bank. These cheques are in fixed amounts and cannot bounce, since they are already paid for by the traveller. 

The individual wishes to purchase a scarf for $35 and wants their change to be in CAD. While the change for one of the $100 USD is not a form of currency exchange, the $100 traveller’s cheque is considered one. 

As for money transferring businesses, they pertain to the transfer of funds from one party to another via either an electronic funds transfer (EFT) network or other methods such as Fei ch’ien and Hawala. There are various types of EFT. For example, they entail automatic teller machines (ATMs), wire transfers, direct deposit systems for payroll purposes, as well as electronic billing using online banking. 

When it comes to issuing money orders and redeeming traveller’s cheques, a business is considered an MSB if it handles these responsibilities. A key term to take note of in this case is ‘issuing,’ which is when one’s business is the party that gives money orders and travellers’ cheques to individuals. As for ‘redeeming,’ it pertains to buying back one’s own business’ money orders and cheques from an individual. 

Although businesses that deal with virtual currency cannot currently register with FINTRAC, they will be able to on June 1, 2020.

Your Guide to the FINTRAC Pre-registration Process

The FINTRAC registration process can be a lengthy one, however, it is nonetheless an important step in the right direction when it comes to complying with the policies set out by the Canadian government.

To make sure that one’s business is covered in the event of legal consequences and unforeseen fees, they should be prepared for registration beforehand with the required material and information. 

Firstly, a business owner will need to fill out the FINTRAC pre-registration form. The first type of information required is the definition of one’s business structure. These can be in the form of a partnership, a corporation, or a sole proprietorship. 

A business is considered to be a partnership if it involves two or more individuals who are responsible for the MSB’s actions. Meanwhile, a corporation is defined by being authorized by either Canadian federal or provincial law. A corporation also has permission to act as a distinct legal entity in addition to having the ability to acquire rights and assume the relevant liabilities. Lastly, a sole proprietorship is a business run by an individual. There is no distinction between that individual and the business entity, which means that the former party is solely responsible for the debts of their unincorporated business. 

In addition to knowing one’s business structure, one should also have their business’ legal name, language of the legal name, street address, city, country, province, business email address, and postal code at the ready. 

As for contact information, FINTRAC requires one to state their salutation, full name, initials, phone number and, if applicable, the phone extension number. Of course, a preferred callback time is requested along with the preferred language of correspondence. FINTRAC offers two languages of correspondence, English and French.

Additional information to have at hand include all the business activities that apply. For example, these activities can include cashing money orders, cashing cheques, dealing with foreign exchange, selling money orders, transferring money, as well as providing payday loans.

Finalizing Your FINTRAC MSB Registration

After fully completing FINTRAC’s pre-registration form, business owners can expect a response within five business days. 

Upon the completion of the pre-registration steps, business owners should then sign in to the MSB registration system with their user ID and password. 

Once signed in, the business owner would be sent to the MSB registration system’s homepage. This page will contain a plethora of information such as the status of the MSB registration form, registration information, as well as the previous login information. There will also be a section with links that allow one to edit the information of their MSB administrator, enter information about data entry officers, change one’s password, cancel the registration process, as well as contact FINTRAC should there be any questions. 

The user can then navigate through the FINTRAC registration form and fill out the required information before their final submission. Information to have at hand should pertain to the owning individuals, owning businesses, business name, and business licence. 

When it comes to the operational side of the MSB, account information, business transactions, record keeping language, reporting entity information, as well as the conduct of MSB transactions should be at the ready. 

Of course, other information such as the business’ main address, mailing address, and contact information should be filled out before submitting the registration form. Business owners get the option to print out the form as well for their own record keeping purposes. 

Before submitting the form, the user will be prompted to review it and make sure all the applicable sections are complete. It is critical to pay attention to the alerts and notification messages that may appear on each page as well, as they indicate which sections have not been filled out yet. 

Once the registration form is submitted, it will be processed within 14 days. Business owners can then expect a notice of approval, a request for clarification, or the reasons for why the registration was rejected. Rejected registration forms can be either be requested for review or put into appeal with the Federal Court of Canada. 

Merchant Broker has a team of dedicated experts who are ready to help businesses with the MSB pre-registration and registration processes. The team is also experienced in finding the best payment processing solutions for MSBs. To contact Merchant Broker, one can either email info@merchantbroker.com or call 1-888-668-0733.

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