Archived FINTRAC Policy Interpretations

We acted as a foreign money services business’ (MSB) representative for service in connection with the entity’s registration as a foreign MSB, but no longer wish to do so on an ongoing basis. Are there any third party companies, agencies, firms, etc. that accept this mandate (for a fee)?

Subparagraphs 11.12(1)(b)(i) and (c)(i) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), require that an applicant that is a foreign MSB, provide the name and address for service of an individual who resides in Canada and who is authorized to accept, on behalf of the person or the entity, as applicable, notices that are served or caused to be served by the Centre under this Act.

If there are any changes to the information provided by the reporting entity, such as a change in their representative for service in Canada, it is the reporting entity that must inform FINTRAC within 30 days. Information on how they may do so is available on our website.

FINTRAC does not endorse any product, service, or service provider and, therefore, is unable to provide a list of third party companies, agencies, or firms that are willing to act as a representative for service in Canada.

Would a business receiving points such as airline miles in exchange for virtual currencies be considered to be dealing in virtual currency?

Persons or entities are “dealing in virtual currency (VC)” when they engage in the business of providing VC exchange or value transfer services. Where exchange services include exchanging funds for VC, VC for funds, or one type of VC for another type of VC. And where transfer services include both the transfer of virtual currency at the request of a client, and the receipt of virtual currency on behalf of a client.

Virtual currency means:

1. a digital representation of value that can be used for payment or investment purposes, that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or
2. a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph (a).

In addition, funds means:

1. Cash and other fiat currencies, and securities, negotiable instruments or other financial instruments that indicate a title or right to or interest in them; or
2. Information that enables a person or entity to have access to a fiat currency other than cash.

Therefore, exchanging points such as airline miles for virtual currency would not be considered “dealing in virtual currency” as the airline miles do not meet the definition of “funds” or “virtual currency” as outlined above. The person or entity would not be subject to the PCMLTFA and associated regulations for this activity. However, should the person or entity also offer the ability to exchange one VC for another, funds for VC, or vice versa then they would be engaged in VC exchange activities and would be required to register with us.

What coins or tokens are covered as virtual currencies?

Pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, virtual currency means:

1. a digital representation of value that can be used for payment or investment purposes, that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or
2. a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph (a).

Therefore, any “coin” or “token” (i.e. digital representation of value), that is not a fiat currency (i.e. the legal tender of a country) and that can be readily exchanged for funds (as defined by the PCMLTFR) or for another VC that can be readily exchanged for funds, would meet the definition of VC for the purposes of the obligations under the Act and its associated Regulations. Please note that readily exchangeable means that the VC may be exchanged for fiat (e.g. USD or CAD) or other funds, or that it may be exchanged for another VC that may be exchanged for fiat or other funds.

However, it is only persons and entities “dealing in VC”, that is, offering VC exchange or value transfer services, that are subject to the Act and its associated Regulations.

An MSB has an administrative office and another address for service. The administrative office is not open to the public, the address is not included in any of the MSB’s materials, and no customers are permitted at this office address for any reason. The MSB has a different address that is used to receive mail and that is included in all published materials.

What address information needs to be provided in the MSB’s registration form?

Does the MSB need to consider the administrative location in its risk assessment?

Pursuant to Schedule 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations, which prescribes the information to be included in an application for registration, item 5 of Part A - Identifying Information on Person or Entity that Is the Applicant - requires an applicant to provide the address of their place of business. In this field the applicant should provide the address of their head office or the main address of their business. In Part B, item 4 requests the mailing address of the place of business (if different from address in item 5 of Part A).

Therefore, the MSB should provide the address of their head office in Part A, which will be displayed on FINTRAC’s MSB registry, and their mailing address in Part B. Please note that an MSB is required to provide this information and FINTRAC is obligated to display the information from Part A, along with any agent, mandatary or branch information from Part C, on its registry.

Moving to your second question, as you know, subsection 9.6(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), requires reporting entities (REs) to develop and implement a compliance program. This program shall include the development and application of policies and procedures for the person or entity to assess, in the course of their activities, the risk of a money laundering offence (ML) or a terrorist activity financing offence (TF). Further, pursuant to subsection 71(1)(c) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), REs must assess and document, in a manner that is appropriate for the person or entity, the risk referred to in subsection 9.6(2) of the Act, taking into consideration:

1. the person’s or entity’s clients and business relationships;
2. the person’s or entity’s products and delivery channels;
3. the geographic location of the person’s or entity’s activities;
   1. any new developments in respect of, or the impact of new technologies on, the person’s or entity’s clients, business relationships, products or delivery channels or the geographic location of their activities;
   2. in the case of an entity that is referred to in any of paragraphs 5(a) to (g) of the Act, any risk resulting from the activities of an entity that is affiliated with it and that is referred to in any of those paragraphs or from the activities of a foreign entity that is affiliated with it and that carries out activities that are similar to those of entities referred to in any of those paragraphs; and

4. any other relevant factor;

    

   The MSB should, therefore, include within its risk assessment the geographic locations of its activities, which can include administrative office locations, where employees are performing activities and tasks related to compliance with the obligations under the PCMLTFA and its associated Regulations (reporting transactions, keeping records, etc.), as there may be aspects to this location that pose an ML/TF risk.

Is an entity considered to be dealing in virtual currency (VC) if it operates VC ATMs? What information needs to be provided when registering with FINTRAC?

Effective June 1, 2020, persons and entities dealing in VC are money services businesses (MSBs). Persons and entities dealing in VC include both VC exchange and VC transfer services. A person or entity that operates a VC automated teller machine (ATM) that allows clients to exchange fiat currency for VC or VC for fiat currency is engaged in VC exchange services and is required to register with FINTRAC as an MSB.

In addition, there is no exemption under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) or its associated Regulations for MSBs who limit transactions to less than $1,000 CAD. An MSB who chooses to limit transactions to $999 CAD or below is still subject to all applicable obligations under the PCMLTFA and its associated Regulations, including the obligation to have a compliance program, to report suspicious transactions, etc.

Finally, should all the VC ATMs be owned by the same legal entity then each location should be entered as a branch of the business.

What is the difference between a money services business (MSB) and a payment service provider, and what the definition is for each?

FINTRAC’s mandate includes ensuring the compliance of reporting entity sectors with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated regulations. 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.

Payment service providers are not defined in the PCMLTFA nor its associated Regulations. 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.

Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) specifies that an MSB “means a person or entity referred to in paragraph 5(h) of the Act.” Paragraph 5(h) of the PCMLTFA thus defines MSBs as “persons and entities engaged in the business of foreign exchange dealing, of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named person or entity.”

With that being said, FINTRAC has taken the position that persons or entities engaged in the business of any of the following, that involve the “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network”, are not considered to be MSBs:
• Utility payments,
• Payroll and commission services,
• Mortgage and rent payment services, and
• Certain tuition payment services.

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 the merchant's 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 merchant 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?

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations do not define the term foreign exchange. That said, paragraph 5(h) of the PCMLTFA identifies that “persons and entities engaged in the business of foreign exchange dealing…” are subject to the PCMLTFA and its associated Regulations as MSBs.

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. In this instance, if the threshold amounts are met, record keeping obligations exist at paragraphs 30(e) and (f) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), for both the foreign exchange transaction and the electronic funds transfer (EFT); reporting obligations also exist for the EFT at paragraph 28(1)(b) of the PCMLTFR, as applicable.

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?

Pursuant to Part C of Schedule 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations, an MSB is required to provide FINTRAC with information on all of its agents, mandataries and branches. In particular, the MSB must provide :

• Trade names, operating names and legal names of every agent or mandatary
• Business address, business telephone number and, if applicable, business e-mail address and website of every agent, mandatary or branch
• Activity or activities referred to in item 9 of Part A that are carried out by agent, mandatary or branch
• Where agent or mandatary is not a person or entity to which Part 1 of the Act applies, address of all locations where the activity or activities referred to in item 9 of Part A are carried out
• Relationship to applicant (whether agent, mandatary, branch or other).

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.

That said, the address information we would expect in the “main address location” would be that of the agent’s bricks and mortar business associated with the truck.  Any information related to the mobile activities of that agent would then be included in the section for “additional agent locations”.  The MSB registration form allows for the agent’s bricks and mortar address to be used again in this section, unless the mobile business has its own legal address listed in business documentation. The reporting entity may consider using the license plate or vehicle details as identifiers in the registration form.

Should the agent solely be mobile, and not have a bricks and mortar location, we would expect the business address listed in the business licensing or documentation of that agent’s mobile business to be included as the main address location. 

Can two individuals remit funds without registering as an MSB with FINTRAC? For example, Tom lives in Country A and wants to send money to a friend in Country B. Jerry also lives in Country A and is travelling to Country B and will deliver Tom's money to his friend in Country B. Is Jerry an MSB?

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Transferring funds from one individual or organization to another using an electronic funds transfer network or any other method such as hawala, hundi, fei ch'ien, and chit.; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

It is not for FINTRAC to dictate how a person may wish to convert their money, or send money to another person. However, if a person or entity offers any of the services listed above without being registered with FINTRAC, then they are doing so in contravention of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

Alternatively, if the person or entity is registered with FINTRAC, but is not carrying out any of the obligations (e.g., record-keeping or reporting), then the person or entity is also in contravention of the PCMLTFA. 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? More specifically,

1. Would an entity that is not resident in Canada qualify to register as an MSB?
2. Can the compliance officer of a money services business work and/or reside outside of Canada? Are there any educational pre-requisites applicable to the individual appointed as the compliance officer?
3. Is there a requirement that the reports submitted to FINTRAC by a money services business (whether electronically or by paper reporting) be submitted from within Canada?

1. MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

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. Some of the criteria considered to establish whether a person or entity is “engaged in the money services business in Canada" include if the business:

• is incorporated in Canada;
• has agents in Canada;
• has physical locations in Canada; or
• maintains a bank account or a server in Canada for the purposes of carrying out MSB activities (among others).

Unless there is a substantive connection to Canada, we do not consider the entity as conducting an MSB in Canada; therefore, the entity cannot register as an MSB with FINTRAC.

2. An entity that is an MSB in Canada must, pursuant to paragraph 71(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR), appoint a person to be responsible for the implementation of the entity’s compliance program. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the PCMLTFR do not require the Compliance Officer to work and/or reside in Canada. Furthermore, neither the PCMLTFA nor the PCMLTFR outline education or training requirements for the entity’s Compliance Officer. That said, FINTRAC has outlined, in Guideline 4: Implementation of a Compliance Regime, the following as considerations when appointing the entity’s Compliance Officer, namely that the individual:

1. should have the authority and the resources necessary to discharge his or her responsibilities effectively;
2. should report, on a regular basis, to the board of directors or senior management, or to the owner or chief operator;
3. should be from a senior level and have direct access to senior management and the board of directors, the case of a large business;
4. should not be directly involved in the receipt, transfer or payment of funds; and
5. could be a senior manager or the owner or operator of the business, in the case of a small business.

3. Finally, an entity that is an MSB in Canada must, pursuant to the requirements of the PCMLTFA and its associated Regulations, submit certain reports to FINTRAC. There is no requirement that these reports be submitted from within Canada.

Our company will offer “pay-out” service to clients (“merchants”). The merchants can instruct our company to pay its international customers or suppliers (“end recipients”). 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. As a result, should our company be registered as a money services business (MSB) with FINTRAC?

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In addition, because your company is international, it must also have a “real and substantial connection” with Canada to be considered an MSB. The criteria considered to establish a real and substantial connection include if the business:

• is incorporated in Canada;
• has agents in Canada;
• has physical locations in Canada;
• maintains a bank account in Canada; or
• maintains a server in Canada for the purposes of carrying out MSB activities.

Based on the information provided, it appears that as a result of its “pay-out” service, your company will offer remitting or transmitting services to your merchant clients to facilitate payment to the end recipients. Additionally, your company will maintain a bank account in Canada, thus establishing a real and substantial connection. As such, it appears as though your company will be engaged as an MSB in Canada, as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

To further clarify, you asked whether your company would be considered an MSB as a result of the following summarized scenarios:

1. Pay-out service provided to merchants outside of Canada to pay end recipients in Canada
2. Pay-out service provided to merchants in Canada with end recipients outside of Canada
3. Pay-out service provided to merchants in Canada with end recipients in Canada
4. Pay-out service provided to merchants outside Canada to pay end recipients outside Canada

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. If this were the case, the Canadian incorporated entity would be required to register with FINTRAC and identify your company as an owner.

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.

This is entirely the makeup of my trading activity.

So, if I sell virtual currency to Canadian citizens/entities under the trading methods that I outlined above, am I required to register with FinTRAC?
Same question as above, but am I required to register with FinTRAC if I do NOT conduct trades with non-Canadian citizens/entities?

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. Individuals and entities engaged in the business of dealing in virtual currency services will be MSBs, but cannot yet register with FINTRAC. 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.

Until these regulations are drafted and in force you are an MSB, and required to register with FINTRAC, if you are engaged in the business of providing any of the following services:

• Foreign exchange dealing (conducting transactions where you exchange one type of currency for another currency);
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

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.

Based on the information you provided, it appears you are not providing any of the MSB services identified above, therefore, at this time, you are not engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations and cannot register with us.

Should our company be registered as a money services business with FINTRAC? 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.

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

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. Specifically, you state that “Two individuals wanting to transfer money are matched on our ecommerce platform. For ease of explanation, we refer to these individuals as Sender A in country X and Sender C in country Y. Sender A desires to transfer a certain amount to Receiver B in country Y while Sender C who desires to send money to Receiver D in country X,” and that your company "enables money transfer after this deal by facilitating local transfer from Sender A to Receiver D and from Sender C to Receiver B. 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.”

As a result, it appears that your entity is providing remitting and transmitting services and is therefore engaged as an MSB as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

Our international business is registered as a money services business (MSB) with FINTRAC. We have incorporated a Canadian entity. How does the creation of this entity affect our currently registered MSB?

MSBs have the obligation to register with FINTRAC and you are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments.

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. As such, the Canadian entity is engaged as an MSB in Canada and is required to register with us. 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. If this is the case, the international business is no longer required to be registered with FINTRAC and must submit a cessation form.

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 revenues from the business’ sales are in one or more North African currency, usually the Tunisian dinar. 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.

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments.

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.

Please confirm my understanding that entities referred to in Paragraph 5(c) of the PCMLTFA have NOT been prescribed for the purposes of section 11.1. In other words, life companies or foreign life companies to which the Insurance Companies Act applies or life insurance companies regulated by a provincial Act are NOT required to be registered with FINTRAC in accordance with sections 11.1, 11.11 and 11.2.

Paragraph 5(c) of the PCMLTFA refers to “life companies or foreign life companies to which the Insurance Companies Act applies or life insurance companies regulated by a provincial Act”. Subsection 1(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) defines a life insurance company as “a life company or foreign life company to which the Insurance Companies Act applies or a life insurance company regulated by a provincial Act.”

Section 11.1 of the PCMLTFA states that “Except as otherwise provided in the regulations, every person or entity referred to in paragraph 5(h), those referred to in paragraph 5(l) that sell money orders to the public, and every other person or entity that is referred to in section 5 and that is prescribed must be registered with the Centre in accordance with this section and sections 11.11 to 11.2.”

That means, it is only persons and entities engaged in the business of foreign exchange dealing, of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named person or entity that are required to register with FINTRAC.

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.

Were there changes to the MSB legislation in the past 3 years?

Here are some provisions from the PCMLTFA and the PCMLTFR that have been amended or added in the past 3 years. If you are interested to compare based on their previous versions, the electronic PCMLTFA and PCMLTFR provide an option to view the previous versions of the amended provisions.

From the PCMLTFA:
11.11 (1) The following persons or entities are not eligible for registration with the Centre:
(a) a listed person as defined in section 1 of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism;

(b) a listed entity as defined in subsection 83.01(1) of the Criminal Code;

(c) a person or entity that has been convicted of any of the following:
(i) a money laundering offence, or an offence under the laws of a foreign country that is substantially similar to a money laundering offence,
(ii) a terrorist activity financing offence, or an offence under the laws of a foreign country that is substantially similar to a terrorist activity financing offence,
(iii) an offence under this Act or the Proceeds of Crime (money laundering) Act, chapter 26 of the Statutes of Canada, 1991 when convicted on indictment, or an offence under the laws of a foreign country that is substantially similar to an offence under either Act,
(iv) an offence under any of sections 83.18 to 83.231, 354 or 467.11 to 467.13 of the Criminal Code, or an offence under the laws of a foreign country that is substantially similar to such an offence, or
(v) a conspiracy or an attempt to commit, being an accessory after the fact in relation to, or any counselling in relation to, an offence referred to in subparagraphs (i) to (iv);

(d) a person or entity that has been convicted on indictment or convicted more than once for an offence under any of the following, or that has been convicted of an offence under the laws of a foreign country that is substantially similar to an offence under any of the following:
(i) Part X of the Criminal Code,
(ii) the Controlled Drugs and Substances Act, except for the offence under subsection 4(1) of that Act,
(iii) section 39, 44.2, 44.3, 48, 50.2 or 50.3 of the Food and Drugs Act, as that section read immediately before May 14, 1997, or
(iv) section 4, 5, 6, 19.1 or 19.2 of the Narcotic Control Act, chapter N-1 of the Revised Statutes of Canada, 1985, as that section read immediately before May 14, 1997;

(e) an entity that is a corporation in respect of which a director, the chief executive officer, the president or a person who owns or controls, directly or indirectly, 20% or more of the shares has been convicted on indictment of an offence under this Act or the Proceeds of Crime (money laundering) Act, chapter 26 of the Statutes of Canada, 1991 or has been convicted of an offence under the laws of a foreign country that is substantially similar to an offence under either Act;

(f) any prescribed person or entity.

(2) If the Centre becomes aware that a person or entity referred to in subsection (1) is registered, the Centre shall revoke the registration and shall, without delay, inform the person or entity of the revocation.

From the PCMLTFR:
59.01 Any money services business that is required to ascertain the identity of any person or confirm the existence of any entity in accordance with section 59 shall
(a) conduct ongoing monitoring of its business relationship with that person or entity; and
(b) keep a record of the measures taken and the information obtained under paragraph (a).

59.02 If, as a result of its ongoing monitoring of a business relationship under paragraph 59.01(a), the money service business considers that the risk of a money laundering offence or terrorist activity financing offence is high, it shall treat that person or entity as high risk for the purpose of subsection 9.6(3) of the Act and apply the prescribed special measures in accordance with section 71.1 of these Regulations.

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.

Does our company need to be registered as a money services business with FINTRAC?

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that your company is a gift card company, where “Customers 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,” and that “The funds are then paid out to franchisees using pre-authorized debits through the bank,” it appears that your entity is not, at this time, engaged in any of the activities listed above. Therefore, your entity does not appear to be an MSB as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. As such, you cannot register with us.

We would like to receive your opinion in order to determine, with respect to our services involving virtual currency, whether or not our business needs to be registered as a money services business (MSB) with FINTRAC.

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. Individuals and entities engaged in the business of dealing in virtual currency services will be MSBs, but cannot yet register with FINTRAC. Before these individuals and entities will be subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, 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.

Until these regulations are drafted and in force you are an MSB, and required to register with FINTRAC, if you are engaged in the business of providing any of the following services:

• Foreign exchange dealing (conducting transactions where you exchange one type of fiat currency for another fiat currency);
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Unless you are carrying out any of the services listed above, you cannot, at this time, be registered with us as an MSB.

That said, you reference the ability for clients to use “Bitcoin as the underlying internal transfer technology that allows users to send remittances online” and indicate that “User accounts that hold Canadian Dollars send funds through Bitcoin’s payment protocol only as a method of simplified monetary movement.” This suggests that, while users are using Bitcoin to simplify monetary movement, a user could ultimately request the beneficiary of a remittance receive a fiat currency. For example, a user wishes to send funds to a relative in Venezuela, so the user sends ABC INC. an amount in Canadian Dollars and requests that the beneficiary in Venezuela receive either Canadian Dollars or Venezuela Bolivar. To remit the funds to Venezuela, ABC INC. converts the Canadian Dollars to Bitcoin to “simplify monetary movement,” but the beneficiary receives the fiat currency equivalent at the other end. Should this be the case, that is a user can request the remittance of fiat currency to another individual or entity, then ABC INC. will be considered as engaged as an MSB in Canada, with all of the associated obligations.

Are we considered as a Money Services Business ?

Although the company focuses on crypto-to-fiat and crypto-to-crypto transactions, one would be effectively able to achieve fiat-to-fiat conversions by combining trades. E.g. the client could be depositing $CAD in his account, convert the funds into a crypto-currency and then sell back that currency in exchange of $USD. The $USD proceeds, shall they be requested for withdrawal would effectively be the result of a $CAD to $USD currency exchange. Henceforth, the company is committed to respect the intent and essence of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act by treating those transactions as foreign exchange deals.

At this time the company doesn't allow people to transmit fiat currency to another person or entity. Payment methods used for withdrawals and deposits will be done by either checks, wires or electronic funds transfers under which the client identity is verified and matched with the client account information.

Based on the explanation you have provided, namely that “the client could be depositing $CAD in his account, convert the funds into a crypto-currency and then sell back that currency in exchange of $USD,” we would agree that it appears that your company will be providing a foreign exchange dealing service, and will, therefore, be engaged as an MSB in Canada.

As an MSB in Canada, you have legal obligations under Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act . This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Here is a possible scenario of how we proceed:

1. The customer enters a store where he can purchase an ABC voucher;
2. The customer gives the store merchant $100 CAD
3. The store merchant provides him with a Voucher containing a PIN that is coded for $100 CAD
4. The customer who purchase the Voucher transmits the Voucher # to a 3rd party outside of Canada
5. The Voucher is presented at a physical store for an equivalent value of goods (food, medicine, medical).

The primary revenue stream of our company would be offering people to send small value vouchers ($1 to $25) back to their home countries that can be redeemed for basic supplies. We intend to offer this service to the purchasers free of charge. Thus allowing them to bypass the high fees of similar services. Our revenue will be earned from the redeeming store as a commission.

When the voucher is sold, the funds at that point are with the selling store merchant. On a weekly basis we will collect the funds from the selling store merchant through an EFT pull. The PIN can be redeemed immediately after issuance.

The client can make purchases for less than the value of the Voucher and PIN.

We anticipate that the majority of the Vouchers sold in Canada will be redeemed for goods denominated in a currency other than CAD. In addition, to selling our Vouchers in Canada, they will be for sale world wide. We determine the value of the voucher in the other currencies by maintaining exchange tables within our software. There will be many currency exchanges occurring because most likely the Voucher will not be redeemed in the currency that it was purchased. In addition, we will settle the merchant acquiring the Voucher in their home currency regardless of the currency we collect from the selling merchant.

We are not creating at any time our own currency. We are simply creating Vouchers that are a proxy for real currencies. That being said, we intend to allow acquiring merchants that sell virtual currencies such as Bitcoin to accept our Vouchers as payment. We have no intention of becoming a seller or buyer of virtual currencies.

As previously indicated, to be considered a money services business in Canada, an individual or entity must be engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information provided, namely that through your company “the customer who purchase the Voucher transmits the Voucher # to a 3rd party outside of Canada” and “that the majority of the Vouchers sold in Canada will be redeemed for goods denominated in a currency other than CAD”, it appears that your entity is, at this time, engaged as a money services business in Canada, as per our Act and associated regulations.

As an Money Services Businesses in Canada, you have legal obligations under Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Based on the following business model, does our company need to be registered as an Money Services Businesses with FINTRAC?

COMPANY OVERVIEW:
Company ABC with experience-derived knowledge and a proven track record encompassing 25+ years in the debit/prepaid/cash-card/e-wallet and communications field in Canada and internationally, is the continuation of its successful business model; established since 1986, where the first cash-card concept originated; with its business-to-business focus and revolutionary-disruptive technology has evolved to become a new, or optional e-Currency concept, allowing for the creation of a unique closed-loop Universal Payment System. The Company developed and owns its e-currency technology and associated intellectual property.

In January 2012, Company ABC, building off the legacy of its history, was established as a unique Independent e-Currency Network of its kind, and licensor of its business model, offering significantly greater value and opportunity (as a closed loop issuer, processor and acquirer), to neglected, underserved markets, particularly persons with no bank accounts and merchants with low, or no credit that are not accepted by credit or debit company for payment acceptance at their stores. Our system, similar to that of Interac, is 100% PIN based, therefore eliminating, or reducing the fraud possibility.

BUSINESS MODEL:

Company ABC Closed Loop cards operate within a system where the Issuer, Processor and Acquirer are the same. Think of Company ABC like a "Shopping Mall" with affiliated retailers, where its network cards can be redeemed and used to pay for goods and services, similar to an Interac Debit Card, at any location within its Mall.

Money services businesses have the obligation to register with FINTRAC. You are an Money Services Businesses if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Your website advises that, “Company ABC's flagship products are composed of a series of unique and innovative, cash cards (prefunded debit cards, virtual electronic accounts, e-wallets, or e-purses, as well as secured credit cards)”, and that “sending money to someone is quick and easy” by means of “a reload, or funding transaction, or a card to card transfer to the recipient’s card.” The recipient can then “get his/her money by simply conducting a Cash Back / Payout transaction at an authorized establishment, or at ATMs displaying our logo.”

Based on the aforementioned, it appears that Company ABC is engaged in the activity of remitting or transmitting funds. Therefore, at this time, Company ABC is engaged as an Money Services Businesses in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

Our company provides users with the option of conducting foreign currency exchange and does not determine the exchange rate. We are responsible for converting the funds using the Xe's rates. Do we need to register as an Money Services Businesses with FINTRAC?

You are considered an Money Services Businesses if your business conducts foreign exchange transactions for more than $1,000 during a single transaction with the same individual or entity. For these purposes, a single transaction is defined as two or more transactions related to a foreign exchange transaction of less than $1,000 each that are made within 24 consecutive hours and that total $1,000 or more.

You have indicated that your entity provides users with the option of conducting foreign currency exchange and although your entity does not determine the exchange rate, it is responsible for, “actually converting the funds.” Based on this information, it appears that your entity is, at this time, engaged in the business of foreign exchange dealing as per our Act and associated regulations. Therefore, at this time, your company is engaged as an Money Services Businesses in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

As an Money Services Businesses in Canada, you have legal obligations under the PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Our entity did not appear to be engaged as an Money Services Businesses in Canada as per the Act and associated regulations. However, I have a couple additional questions.

1. Does this mean as long as the transaction is in CAD and is to/from Canadian Banks, it is not necessary for our organizations to report the transactions to FINTRAC i.e. even when it exceeds the transaction limit FINTRAC mentions on the website. Let's say a Canadian Virtual Currency Buyer online transfers 10,000 CAD to our company account or when our company does an online transfer of 10,000 CAD to Canadian Virtual Currency Seller?
2. Is there any transaction limit set for domestic CAD transactions (i.e. to/from Canadian Banks as outlined above), above-which an organization carrying out such a transaction is classified as Money Services Businesses?

To be considered an Money Services Businesses in Canada, the Money Services Businesses must be engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In response to your questions, I can provide the following guidance. While the PCMLTFA applies to businesses engaged in “remitting funds or transmitting funds by any means,” this does not apply to virtual currencies because they do not fall within the definition of “funds” under the PCMLTFR. The PCMLTFA also covers businesses engaged in “foreign exchange dealing,” however, this also does not apply to virtual currencies as they are not a national currency of any country. With this in mind, it is important to note that handling virtual currency, or defining a business as a virtual currency exchange, does not automatically make the business exempt from registering as an Money Services Businesses. The business may perform other activities, which may or may not involve virtual currency, which would make it subject to the PCMLTFA.

I strongly encourage you to review the “Guidelines” section of FINTRAC’s Web site. Here you will find guidance specific to the reporting, record-keeping and identification obligations of money services businesses in Canada. I 

We are a telecom company. We are planning on introducing a new service to our customers that involves a slightly different form of money transfer than is currently found on the market. We would like FINTRAC's input on whether or not our planned service is an MSB, and if we need to register with FINTRAC or not.

Under this new service, our existing customers would be able to use our website to transfer using their Debit/Credit Cards funds less than, or equal to $500 per month per customer to a mobile-wallet account of the recipient. The recipient would be a mobile/GSM subscriber of a telecom operator with a mobile-wallet system anywhere in the world. An example of a mobile-wallet system would be the XYZ system used in Kenya.

The transfer of funds from our customer to the recipient would be facilitated by a clearing house. Some of the these mobile-wallet systems allow for the cashing of wallet funds, like XYZ, while others don't and are converted to customer airtime instead.

We would like to advice from FINTRAC on the following:

• Do we need to register with FINTRAC, given that all transfers per customer per month will be under $500?
• If we register with FINTRAC under the name our company, are we expected to have MSB and/or financial record-keeping separate from our current telecom operations?

In response to your first question, you are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that “customers would be able to use our website to transfer using their Debit/Credit Cards funds less than, or equal to $500 per month per customer to a mobile-wallet account of the recipient” and that “some of the these mobile-wallet systems allow for the cashing of wallet funds, like XYZ, while others don't and are converted to customer airtime instead,” it appears that your entity will be engaged as a money services business in Canada, as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated regulations. The fact that the remission or transmission of funds will be less than or equal to $500.00 per month, per customer, does not impact this determination. I am providing you with a link to the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is a money services business for purposes of Part 1 of the PCMLTFA.

As an MSB in Canada, you have legal obligations under Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities.

In response to your second question, it is important to differentiate between the record-keeping obligations outlined in the PCMLTFA and any requirements to keep financial statements for business accounting purposes. The PCMLTFA and its associated Regulations do not outline obligations related to a business’ financial statements for accounting purposes. The record-keeping obligations outlined in the PCMTLFA and its associated Regulations are specific to records a reporting entity must keep about their clients and the transactions that these clients may carry out; transactions specific to the money services business activities.

That said, once an entity is engaged in money services business activities, all of its activities become subject to the suspicious transaction obligations of the PCMLTFA and its associated Regulations. For example, should an MSB also sell couches, the activities related to the sale of a couch would need to be considered against the suspicious transaction obligations of the PCMLTFA and its associated Regulations.

We intend to sell Pre-paid bitcoin cards at retail locations. Those cards have activation codes on them. The activation codes can be redeemed only on our website for credit. The user then trades the credit for Bitcoins on our website. We will not allow clients to redeem over $1000 a day. We plan on using a third party service to verify the person is who they say they are to comply with AML/KYC.

Would we be considered a Money Service Business?

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you have provided, namely that you, “intend to sell Pre-paid bitcoin cards at retail locations” and that, “those cards have activation codes on them. The activation codes can be redeemed only on our website for credit,” it appears that your entity is not, at this time, engaged as an MSB in Canada as per our Act and associated regulations. Therefore, you cannot be registered with us.

Should your business model change in the future to expand beyond offering pre-paid Bitcoin cards, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

We would appreciate receiving guidance from FINTRAC regarding its interpretation of the MSB rules under the PCMLTFA and their application to closed-loop prepaid access cards. Under the prepaid access rules promulgated in the United States by FinCEN, the following activity is not deemed to be part of a prepaid access program, and businesses engaged in this activity would not be subject to registration as a "money services business" with FinCEN:

• If the prepaid access device (e.g., prepaid gift cards) are issued as part of a "closed loop prepaid" access program, i.e., the funds may only be used for goods and services involving a defined merchant or location, such as a specific retailer or chain (31 CFR§1010.100(kkk)) and
• If the gift card provides closed loop access to funds not exceeding US$2,000 on any day (31 CFR§1010.100(kkk))

FinCEN has concluded that closed loop prepaid access cards which have these features present a very limited risk of AML or financial abuse.

Money services businesses in Canada are subject to the PCMLTFA and its associated Regulations. In Canada, an entity is an MSB if it is engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Once an entity is engaged in money services business activities, all of its activities become subject to the suspicious transaction obligations of the PCMLTFA and its associated Regulations. For example, should an MSB also sell couches, the activities related to the sale of these couches would need to be considered against the suspicious transaction obligations of the PCMLTFA and its associated Regulations.

To solely provide closed-loop prepaid access cards does not make an entity an MSB, therefore, the entity would not be subject to the PCMLTFA and its associated Regulations. However, should an entity be engaged in MSB activities, and add to these the provision of closed-loop prepaid access cards, then this prepaid card activity would be subject to the suspicious transaction requirements of the PCMLTFA and its associated Regulations.

Does the company ABC (Alberta) need to be registered as an MSB with FINTRAC?

Consumers can buy and sell Bitcoins using ATMs that Company ABC has solely for this purpose. For the consumer to sell Bitcoins to Company ABC, a consumer will scan a digital wallet and specify the amount being sold to the ATM. The ATM will then calculate the market price of Bitcoin and subtract the transaction fee (a pre-set percentage) from the total amount to be received in fiat. The Bitcoins purchased from the consumer will then be transferred to Company ABC’s online exchange account and an amount in Canadian dollars will be dispensed to the consumer. For a consumer to purchase Bitcoins from Company ABC, the business’ inventory of current Bitcoins will be used. The consumer will be charged an amount in Canadian dollars, plus a transaction fee (a pre-set percentage) to receive Bitcoins to the consumer’s digital wallet.

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the summary of Company ABC, it appears that your entity is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations.

Therefore, you do not have to register your entity with us.

Should your business model change in the future to expand beyond offering services such as buying and selling virtual currency, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

We would like to establish an online business of transferring funds from one individual or organization to another and all transactions are taking place online. Individuals or organizations send money using our platform, and all transactions will be within Canada.

Do we need to be registered as an MSB with FINTRAC?

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you have provided, it appears that your entity is, at this time, engaged as an MSB in Canada as per our Act and associated regulations. Subsection 28(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) states:

• 28. (1) Subject to subsection 52(1), every money services business shall report the following transactions and information to the Centre:

(a) the receipt from a client of an amount in cash of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 1, unless the cash is received from a financial entity or a public body;
(b) the sending out of Canada, at the request of a client, of an electronic funds transfer of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 2 or 5, as the case may be; and
(c) the receipt from outside Canada of an electronic funds transfer, sent at the request of a client, of $10,000 or more in the course of a single transaction, together with the information referred to in Schedule 3 or 6, as the case may be.

That being said, subsection 28(2) of the PCMLTFR goes on to specify that, “paragraph (1)(b) does not apply when the money services business sends an electronic funds transfer to a person or an entity in Canada, even if the final recipient is outside Canada.” Given the fact you are engaged in transmitting funds but are only doing so within Canada, you do not need to report these transactions. However, as an MSB in Canada, you do have legal obligations under Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). This includes registering your business with FINTRAC, reporting any large cash transaction of $10,000 or more you receive and record keeping obligations in regards to that transaction. You must also report any suspicious transactions, as well as terrorist property reports. You have a number of other record keeping obligations, ascertaining identity in certain situations, performing Politically Exposed Foreign Person determination(s), third party determination(s), and finally, you must also implement a compliance regime.

Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Since March 2012 our corporation had developed an additional channel of business – vault storage of valuables for our clients.

The question relates to the following transaction which we were requested to execute: The customer requested us to store his cash (amount of up to $20,000). And the procedure which was requested is that the customer will wire-transfer the money to our bank account, while our company will withdraw the transferred amount and will store it in a physical storage on our premises.

Should we report such transaction to FINTRAC?

To be considered a money services business (MSB), an individual or entity must be engaged in the business of any of the following activities in Canada:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that, “The customer requested us to store his cash (amount of up to $20,000). And the procedure which was requested is that the customer will wire-transfer the money to our bank account, while your company will withdraw the transferred amount and will store it in a physical storage on our premises,” it does not appear that your entity is, at this time, engaged as an MSB in Canada as per the PCMLTFA and its associated Regulations. In fact, your business doesn’t provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds (via wire) is simply a corollary of the actual service of financial storage. Therefore, you cannot be registered with us and are thus not required to report the above-mentioned activity.

I am seeking advice about launching a regulated Bitcoin Exchange business in Canada.

A recent article suggested that while FinTRAC does not consider Bitcoins to be funds, conducting a transaction:

1. between two fiat currencies with Bitcoin as an intermediate step; or
2. between Bitcoin and non-Canadian fiat currency

would be counted as foreign exchange and therefore require a Bitcoin Exchange to be regulated.

Would you be able to confirm whether this interpretation is correct and could you confirm which regulatory body within Canada would be responsible for regulating such an Exchange?

To be considered a money services business, an individual or entity must be engaged in the business of any of the following activities in Canada:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

It appears that your company will be offering its clients “Bitcoin/ fiat currency transactions”. Your documentation explains how an Exchange user could perform this type of transaction in the following example:

1. Log into Exchange account and selects add CAD100 credit
2. Transfers CAD100 from personal bank account into Exchange’s bank account, quoting one-off payment reference
3. Buys CAD100 of BTC from the Exchange at a quoted rate based on the Exchange’s bid/ ask spread
4. Uses BTC balance to buy GBP from the Exchange at a quoted rate based on the Exchange’s bid/ ask spread
5. Withdraws GBP from the Exchange to personal GBP bank account

Your documentation also indicates that, “Even where users think they are making a straight conversion from, for instance, CAD to GBP, the actual Back-office transaction will include Bitcoin as a mid-way currency […],” and that, “The Exchange will hold bank accounts with a major bank in each jurisdiction in whose currency we trade – e.g. CAD bank account in Canada & GBP bank in the UK.”

Based on the above information, it appears that your entity will be engaged in foreign exchange dealing and as such, will be a money services business in Canada as per our Act and its associated Regulations.

I wanted to confirm a view regarding a non-Canadian money services business that sends funds into Canada to a Canadian recipient.

I understood from my earlier communications with FINTRAC that, provided the non-Canadian MSB does not have a presence in Canada nor employees or agents in Canada, the non-Canadian MSB would not have to be registered with FINTRAC with respect to money transmissions into Canada to Canadians. Is this still correct?

To determine whether an MSB is engaged in money services business in Canada, we must determine the applicability of paragraph 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in addition to whether the entity has a "real and substantial connection" with Canada.

Criteria relevant to this determination may include whether the business is incorporated in Canada, whether the business has agents in Canada, whether the business has physical locations in Canada and/ or whether the business maintains a bank account or a server in Canada. In that vein, a Canadian bank account for the purposes of carrying on MSB activities is considered to be a “real and substantial connection to Canada”. Although an MSB may not have a physical presence in Canada, having a bank account in Canada for the purposes of remitting funds to a Canadian beneficiary ultimately means that the entity has a real and substantial connection to Canada and is subject to the legal obligations under the PCMLTFA and its associated regulations.

This includes registering the entity with us, reporting to us, keeping records, identifying its clients, and having a compliance regime.

Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of these obligations and responsibilities. All of these are described in greater detail on our Web site.

I have a client who operates an MSB, a remittance service, in both Canada and the United States. Client use the service to send money to family overseas. This client finds it expensive and time-consuming to maintain correspondent banking relationships around the world for both the Canadian and US entities. They would find it much more efficient if the Canadian entity could perform the "back office" operations on behalf of the U.S. entity.

Effectively, the U.S. entity would accept the funds to be remitted, and perform all the client identification and recordkeeping procedures required under the U.S. legislation. The U.S. entity would also file STRs, and meet all of the other requirements under U.S. legislation. However, the U.S. entity would contract with the Canadian entity to have the Canadian entity remit the funds to the recipient on behalf of, and in satisfaction of the obligations of, the U.S. entity.

Since the Canadian entity already has a network of correspondent banks, the process would eliminate the need for the U.S. entity to maintain its own separate network of correspondent banks.

I cannot find anything the PCMLTFA which would prohibit the arrangement described above, and furthermore, I cannot find anything that prevents a Canadian MSB from acting as a service provider to a foreign MSB. Also, I do not believe that the provision of such back office services is activity which is regulated under PCMLTFA.

The question is: Is transmitting funds on behalf of a related MSB permitted?

If the U.S. entity “contracts with the Canadian entity to have the Canadian entity remit the funds to the recipient on behalf of, and in satisfaction of the obligations of, the U.S. entity,” you are correct in stating, in this particular scenario, that the Canadian MSB is “not engaged in the business of doing such remittance or transfers of funds and only the US MSB is so engaged.” You are also correct in stating that nothing prevents a Canadian MSB from providing these services on behalf of the foreign MSB.

However, in this scenario, it appears that the Canadian MSB is acting as an agent, rather than a service provider, of the U.S. MSB for the purpose of remitting and transmitting funds. Foreign entities carrying out MSB activities in Canada through agents or branches are required, as per Section 11.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), to register with FINTRAC as MSBs and list, as per subsection 11.12(1) of the PCMLTFA, their agents and branches accordingly.

Despite the fact that the Canadian MSB is an MSB itself, in this scenario, it is acting as an agent of the U.S. MSB and needs to be listed this way in the U.S. MSB’s registration.

We would like to know if our business needs to be registered as a Money Services Business (MSB) with FINTRAC?

An entity is considered an MSB under subsection 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) if it is engaged in foreign exchange dealing, remitting or transmitting funds by any means or through any person, entity, or electronic funds transfer network or issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named person or entity. This subsection of the PCMLFTA specifically excludes cheques made payable to a named person or entity.

Based on the information you have provided, namely, that your company does the processing of cheques for charities and “receives the checks here in Canada thru the office in Israel, deposit them in our account (no third party cheques), once funds have cleared, we send the funds back to the office in Israel,” it does not appear that your entity is, at this time, engaged as an MSB in Canada as per the PCMLTFA and associated regulations. Therefore, you cannot register with us.

Should your business model change in the future to expand beyond processing cheques made payable to a specific person or entity, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

Company ABC will offer voucher services to our customers which is expected to be mainly the immigrant communities.

Company ABC will first move a large batch of money through the Banks to take advantage of good FX rates and low fees for large amounts of transfer. For example $50,000 FJD. The actual international money transfer occurs with this transaction.

Then smaller amount of voucher for specific retailers in Fiji will be sold from this batch to customers in Canada L1036 for example vouchers of $20 FJD or $50 FJD for the use by beneficiaries in Fiji at a particular store.

When a customer in Canada buys a voucher of $50 FJD, the Canadian customer will pay Company ABC in Canada in Canadian dollars a sum of say $35 CAD. The instant this sum is confirmed paid to Company ABC in its Canadian Bank Account, a value of $50 FJD will be reserved in the batch in Fiji towards this voucher.

The beneficiary of the voucher will then go to the selected retailer for the voucher and be able to take $50 of goods or services offered by the retailer.

This way the sender is able to control what their money is used for by the beneficiary. Schools, Doctors, Pharmacy, Utilities will some examples of suppliers that a sender can choose.

The high cost of remittance for small amounts will be reduced due to the additional revenue derived as commission from the retailer for the sale of the voucher. Thus allowing Company ABC to reduce the cost of remittance for small amounts to the customer in Canada.

When the money collected in Canada builds up to a big amount, then again this batch of money will be transferred to Fiji or Samoa as the next batch.

Voucher types will be retail vouchers or money voucher or charity vouchers.

Retail voucher is where a beneficiary can only receive the goods or services offered by the retailer chosen by the sender.
Money voucher is where the sender intends to give cash to the beneficiary and thus selects a money voucher.
Charity voucher is where charity organizations can receive donations from their supporters. Company ABC intends to not charge fees for this service to the charity organizations.

Therefore, does Company ABC need to be registered as a Money Services Business (MSB) with FINTRAC?

You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity, or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

You have indicated that Company ABC “will offer voucher services” that will include different types of vouchers, namely, retail vouchers, money vouchers, and charity vouchers.

Based solely on the information you have provided, namely that your business will be offering money voucher services, whereby “the sender intends to give cash to the beneficiary and thus selects a money voucher,” it appears that Company ABC is engaged in the activity of remitting or transmitting funds. Therefore, at this time, Company ABC is engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations.

As an MSB in Canada, you have legal obligations under the PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our Web site. It is important that you understand these obligations and meet them to be in full compliance with this law.

Background
We have developed a digital cash payments platform. Our solution is a legitimate payments business that aspires to reduce the number of cash transactions by offering retailers a cheaper, faster, more secure alternative. Our digital cash platform mints high-encrypted single use digital coins that can be validated and settled in real time. We are working with some of the best cryptographers globally, to build a cheaper, more secure payments platform.

Since we are a legitimate business that has every intention of complying with all regulation, we thought we should err on the side of caution, by discussing our intention to do a trial in advance.

Digital Cash
Has all the benefits of cash - intrinsic value, no recourse, immediate settlement and anonymity, but all of the advantages of an electronic payment - ability to transact remotely, a transaction record and security.

Our Platform
We are currently focused in the Canadian marketplace, although believe that once successful in Canada there are many opportunities to expand abroad. Our clients could be any merchant, either bricks & mortar or on-line. Our solution will start with P2B payments, but will expand to P2P, B2B and P2C payments. (P=Person, B=Business, C=Charity).

We are effectively building a cloud based software only closed loop payments platform that will extend across many merchants. In the medium term, we will open up the environment to allow additional mints/validator (Issuers/Acquirers). In the long term we will make the platform multi-currency including rewards, coupons and marketing.

We would like to know if we have to register with FINTRAC as an MSB.

To be considered a Money Services Business (MSB), an individual or entity must be engaged in the business of any of the following activities in Canada:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

If your entity is remitting and/or transmitting funds of merchants and/or consumers for the purpose of carrying out “electronic payments,” or more specifically, “P2B payments” or person to business payments, it would seem that your entity is, at this time, engaged as an MSB in Canada as per our Act and its associated Regulations. If your entity is engaged in this activity, you will need to register your entity with us.

I am providing you with a link to the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is an MSB for purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

As an MSB in Canada, you have legal obligations under Canada’s PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime. Our publication, Your Money Services Business in Canada: What you need to know, gives a short summary of your obligations and responsibilities. All of these are described in greater detail on our website. It is important that you understand these obligations and meet them to be in full compliance with this law.

Can you confirm that a Bitcoin exchange that transfers funds as a corollary of its actual service of buying and selling virtual currency does not provide the services of remitting and/or transferring funds for the sake of the service, and therefore is not required to register with FINTRAC as a money services business?

Money services businesses have the obligation to register with FINTRAC. To be considered as an MSB in Canada, the entity must be engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

The trade of digital tokens, including Bitcoins, is not recognized under the PCMLTFA as one of the three MSB activities listed above. While the remitting or transmitting of funds is an MSB activity, in this specific scenario, the remitting or transmitting of funds that occurs is incidental and only happens as the business carries out its core activity of trading digital tokens. The remitting and transmitting of funds is the method used by this business to provide its service of trading digital tokens.

In addition, handling Bitcoins, or defining a business as a Bitcoin Exchange, does not automatically make the business exempt from registering as an MSB. The business may perform other activities, which may or may not involve Bitcoins, which would make it subject to the PCMLTFA.

While the PCMLTFA applies to businesses engaged in “foreign exchange dealing,” this does not apply to Bitcoin as it is not a national currency of any country.

Company ABC is a coin processor. We receive coins in large volumes from various entities including municipalities, transit, vending, parking and charities. Coins are processed at our facility and packaged into rolls and boxes and deposited with armoured car service providers who in turn credit our bank accounts for the deposits. Our customers are paid for the coins via cheque, bank deposit or wire. Does Company ABC need to be registered as a Money Services Business (MSB) with FINTRAC?

Money services businesses have the obligation to register with FINTRAC. To be considered as an MSB in Canada, the entity must be engaged in the business of any of the following activities: • Foreign exchange dealing; • Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or • Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity). Based on the information you provided, namely that “We receive coins in large volumes from various entities including municipalities, transit, vending, parking and charities. Coins are processed at our facility and packaged into rolls and boxes and deposited with armoured car service providers who in turn credit our bank accounts for the deposits. Our customers are paid for the coins via cheque, bank deposit or wire”, it appears that your entity is not, at this time, engaged as a money services business in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated regulations. Therefore, you do not have to register your entity with us. In fact, the processing of coins is not recognized under the PCMLTFA as one of the three MSB activities listed above. While the remitting or transmitting of funds is an MSB activity, in this specific scenario, the remitting or transmitting of funds that occurs is incidental and only happens as the business carries out its core activity of processing coins. The remitting and transmitting of funds is the method used by your business to provide its service of processing coins.

Does Company ABC, that purchases virtual currency such as bitcoins, litecoins, facebook credits, world of warcraft coins at bulk discount rates and sells it at physical locations across the country as well as online through cash deposits in banks needs to be registered as a Money Services Business (MSB) with FINTRAC?

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that “Company ABC purchases virtual currency such as bitcoins, litecoins, facebook credits, world of warcraft coins at bulk discount rates and sells it at physical locations across the country as well as online through cash deposits in banks. In our physical stores we will collect the money from buyers first before sending them the virtual credits”, it appears that your entity is not, at this time, engaged as a money services business in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing and its associated Regulations. In fact, your entity doesn’t provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of your actual service of buying and selling virtual currency. Therefore, you do not have to register your entity with us.

1. Buy and Sell Bitcoins directly from customers.

• Offer Bitcoins at a fixed rate
• All sales and purchases are directly with the company

2. Bitcoin payment provider

• Create software for business to accept Bitcoin payments and either keep Bitcoins or automatically convert to CAD
• In this situation a customer would go to the digital or physical store and pay the merchant with Bitcoins ? from any number of Bitcoin services
• The merchant would have an agreement with to automatically sell those Bitcoins to the company at the posted rate and receive CAD ? alternatively they can keep the Bitcoins

3. Start an exchange

• Create an order book where people can put in an order at x price and hope it gets filled.
• In this case the users are buying and selling from each other with the facilitation of the exchange which takes a fee.

MSBs have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that your entity “Buy and Sell Bitcoins directly from customers”, it appears that your entity is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. In fact, your entity doesn’t provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of your actual service of buying and selling virtual currency. Also, the creation of a “software for business to accept Bitcoin payments and either keep Bitcoins or automatically convert to CAD” and an “order book where people can put in an order at x price and hope it gets filled” does not make your entity, at this time, engaged as an MSB in Canada since your entity provides a platform allowing businesses to accept or trade virtual currency.

Therefore, you do not have to register your entity with us.

Our business is engaged in the trade of digital tokens, particularly Bitcoin and Litecoin. A summary our current business model is as follows:

• We work with suppliers of these digital goods who wish to sell them online. They send us their tokens and we in turn sell them to our customers. After selling, we then pay these suppliers a commission of the sales for their goods. These commissions are paid through direct deposit or wire transfer.
• Customers fund their accounts with us and purchase the goods for sale on our platform. Payments are sent to us electronically.
• For large purchases (over $2,000/day), we require photo identification and proof of address as a measure against fraud.
• Our future implementation is looking to also accept cash in physical locations. However, we are unsure whether doing so would require us to take extra steps to become an MSB, or implement other anti-money laundering procedures.

We are hoping to clarify whether or not our business is considered an MSB.

Money services businesses (MSBs) have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that your “business is engaged in the trade of digital tokens, particularly Bitcoin and Litecoin”, it appears that your entity is not, at this time, engaged as an MSB in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. In fact, your business doesn’t provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of your actual service of trading virtual currency. Therefore, you do not have to register your entity with us.

Putting cheques and bank drafts into the context of our legislation, since cheques made payable to a named individual are specifically excluded, am I correct to assume bank drafts made payable to a named individual are also not covered?

No, bank drafts made payable to a named individual are covered as similar negotiable instruments. According to the definition provided in the Cross-border Currency and Monetary Instruments Reporting Regulations in Section 1(1), negotiable instruments include “bank drafts, cheques, promissory notes, travellers’ cheques and money orders, other than warehouse receipts or bills of lading.”

Subsection 5(h) of the PCMLTFA states “issuing and redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named person or entity.” This subsection of the Act specifically excludes cheques made payable to a named person or entity, while bank drafts, which are not the same as cheques made payable to a named person or entity, are not excluded, so are considered to be similar negotiable instruments which can be issued and redeemed.

As indicated in our previous discussions re: issuing/redeeming, the issuer is the entity that makes available it’s business’ money orders, traveller’s cheques or negotiable instruments, so would be the financial institution in the case of cheques or a chequebook. In the context of the PCMLTFA, redeeming means for the issuing entity to repurchase the negotiable instrument by returning the purchase price to the buyer and/or removing the negotiable instrument from the market. And, to accept the negotiable instruments of an issuer and return the cash equivalent to the client is considered to be cashing not redeeming.

I am contacting FINTRAC on behalf of 123, a factoring company with a subsidiaries located in Toronto and Montreal. I am trying to find out what the regulatory requirements are for a factoring company to stay in compliance with anti money laundering laws. Please note that we are not a bank nor regulated like a bank. I am not sure if we qualify as a money services business or not. I appreciate any information or resources you can provide.

For an entity to be a reporting entity subject to the PCMLTFA, it must fall within one of the categories of reporting entities outlined in section 5 of the Act. ‘Factoring entities’ do not fit into any of these categories to classify them as persons or entities subject to the PCMLTFA.

Based on the information you provided, namely that your business provides “accounts receivable financing (factoring)” services, it appears that your entity is not, at this time, subject to our Act and its associated Regulations.

Basically the question is if an entity in Canada takes money from the public and transfers the funds to an overseas entity on their behalf, are these funds transfers subject to reporting? Is the Canadian entity now acting as a non-registered MSB?

And would it matter that both entities I am referring to are registered charities in their respective countries and are places of worship (church, mosque, etc.) and the funds transfers are titled as donations provided by worshippers in Canada for the spiritual leader of the overseas church or mosque, etc.? (So essentially the Canadian charity is acting as a conduit to facilitate the collection and transfer of funds from Canada to an overseas person.)

It appears that this entity is engaged in the business of remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network, since this entity in Canada takes money from the public and transfers the funds to an overseas entity on their behalf. As such, this entity has obligations under our Law, including to be registered as a Money Services Business.

The fact that this entity is a registered charity in Canada, is a place of worship, and the funds transfers are titled as donations provided by worshippers in Canada for the spiritual leader of the overseas church or mosque do not exempt this entity of having obligations.

An Ontario corporation is in the business of telephone service provision and airtime credit recharge service. This business is a service for providing a facility to let customers purchase airtime credit amount and send it to a prepaid mobile telephone subscriber number.

Please provide guidance.

Money services businesses have the obligation to register with FINTRAC. You are an MSB if you are engaged in the business of any of the following activities:

• Foreign exchange dealing;
• Remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
• Issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

Based on the information you provided, namely that ABC Inc. provides the ability to “buy AirTime Credit amount in US$ and use it to send AirTime Credit, in the recipient's local currency, to someone's mobile telephone number account” and furthermore, allows the customer to “send Credit Amount in Local Currency to Loved Ones back home in old country for them to use to make calls”, it appears that your entity is, at this time, remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network, so is engaged as a money services business in Canada and is subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its associated Regulations. I am providing you with a link to the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is a money services business for purposes of Part 1 of the PCMLTFA.

As an MSB in Canada, you have legal obligations under Canada’s PCMLTFA. This includes registering your business with us, reporting to us, keeping records, identifying your clients, and having a compliance regime.

I want to set up a company that only exists virtually, on the Internet, and does not have any physical branches.

The principle: A user (A) wants to transfer funds to another user (B). User A uses our Web platform and makes the payment via credit card. The money is initially routed through my corporate account, after which it is transferred to user B's account, less the commission. Users may be individuals, businesses, charities, etc. What are my obligations and what is the status of my company under the existing legislation?

A money services business (MSB) means an individual or an entity that is engaged in the business of any of the following activities:

• foreign exchange dealing;
• remitting or transmitting funds by any means or through any individual, entity or electronic funds transfer network; or
• issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments. This does not include redeeming cheques payable to a named individual or entity.

Based on the business model you provided, according to the definition in section 5(h) of the Act, your company is a Canadian money services business. Your company therefore appears to be covered under our Act. As a result, you are required to register with FINTRAC, and you must comply with the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

FINTRAC Interpretation Notice No. 1, provides guidance regarding the individuals or entities that are considered as money services businesses for the purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

As a Canadian money services business, you have certain legal obligations. These include registering with FINTRAC, producing statements, keeping records, verifying client identity and having a compliance program.

Attached is our form agreement for direct selling companies (each a "Payor") using our ABC software platform. Our position is that each pay portal belongs to the Payor pursuant to a software license from XYZ Inc. The Payor uses the pay portals to communicate with payees. XYZ Inc. only accepts instructions from the Payor. Below I will demonstrate that:

1. XYZ Inc. has no privity of contract with payees;
2. XYZ Inc. has privity of contract with, and acts as agent for, the Payor; and
3. the Payor has de facto control of the funds in the pay portals.

1. The online contract signed by payees (MLM salespeople) is between the payee and the Payor.
    
2. XYZ Inc. has privity of contract with, and acts as agent for, the Payor. Paragraph 6 in Part I of Schedule "A" (page 12) provides that we hold funds in pay portals as agent for the Payor and not the payee. This paragraph further provides that the Payor can recall its funds at any time. This demonstrates that we are taking instructions from the Payor. The exact language is:

   "XYZ Inc. shall act as Customer’s agent with respect to all Customer funds held by XYZ Inc. and designated for distribution to Authorized Users through the Application Service. All Customer funds so designated shall be held in pooled accounts (“Pooled Accounts”) for Customer and other users of the Services, and segregated from XYZ Inc.'s operating accounts until such funds are either returned to Customer at its request, transferred to an Authorized User’s bank account or cashed out to another integrated third party network. Pooled Accounts shall be designated “for the benefit of” Customer and other users of the Services where reasonably practicable, as determined by XYZ Inc. in its sole discretion.”
    

3. the Payor has de facto control of the funds in the pay portals. The Payor receives instructions from the payee and separately authorizes XYZ Inc. to carry out those instructions. See Schedule "C", paragraph 9 (page 16), which provides:

“Customer authorizes XYZ Inc. to configure the Application Service to fulfil all Authorized User instructions for the completion of bank transfers, or cash out transactions with integrated third party networks, until further notice from Customer.”

In conclusion, As the party in between the software license provider and the payee, the Payor uses pay portals to communicate with its payees and it uses the licensed software more generally to provide payment instructions to XYZ Inc. XYZ Inc. instructions always come from the Payor, the party with whom we have a contractual relationship. The Payor has the exclusive ability to fund its pay portals. Pay portals cannot be payee-funded. When a payee enters his or her bank account information and clicks "cash out to bank account", this instruction is given to the Payor, not XYZ Inc. The Payor authorizes XYZ Inc., the software provider, to carry out those instructions.

Nearly all of our revenues come from the ABC service, and a FINTRAC mandate to KYC payees would probably put us out of business. On a more positive note, an affirmative letter that ABC is not subject to FINTRAC's regulation and EFT reporting requirements would greatly ease our administrative burdens going forward.

Below is a summary of the information provided re: XYZ Inc.:

• XYZ Inc. is an online MSB that offers “Wallet” accounts for its customers, where the customers can send EFTs through their online accounts.
• One of the products XYZ Inc. offers is the ABC Pay Portal.
• ABC Pay Portal is a global payment solution designed so a client can send payments to multiple recipients.

In the case before us, XYZ Inc. is used by companies to pay out the commissions of its sales representatives. XYZ Inc. creates virtual accounts for all of the sales representatives in its system:

• The Payor registers ABC Pay Portal accounts for the Payees by uploading basic payee information into the system, such as their name, internal ID number, address and email address
• The Payor uploads payment information identifying the recipients and the amounts to be paid into each recipient’s account via the ABC system. The Payee’s Pay Portal is automatically credited with this amount. The funds used for the payments are debited from the Payor’s pre-funded ABC Loading Account
• Payees access their Pay Portals online or by using their mobile device to transfer their payments to their bank accounts (or to an attached prepaid card, if applicable), managing their own banking information. They also have the option to automatically sweep incoming ABC payments to the bank account(s) and/or ABC prepaid card of their choice
• In addition to transferring the funds out of their Paylution account, it is possible for Payees to integrate their online shopping cart with Paylution to enable them to use the funds in their Pay Portal to make new purchases from the company (“Spendback”)

XYZ Inc. indicated that:

• The Payor funds are held in a pooled account, and segregated from XYZ Inc.'s operating accounts until such funds are either returned to the Payor at its request, transferred to a Payee’s bank account or cashed out to another integrated third party network
• The Payor uses pay portals to communicate with its Payees and it uses the licensed software more generally to provide payment instructions to XYZ Inc. XYZ Inc. instructions always come from the Payor
• The Payor receives instructions from the Payee and separately authorizes XYZ Inc. to carry out those instructions
• Pay portals cannot be Payee-funded. When a Payee enters his or her bank account information and clicks "cash out to bank account", this instruction is given to the Payor, not to XYZ Inc.
• The Payor can set an “opt-in” or “opt-out” function for auto-cash out

Based on this information, is ABC Pay Portal, as described in XYZ Inc.’s business model, subject to the PCMLTFA and its associated Regulations?

The Centre has previously taken the position that persons or entities engaged in the business of payroll services and payments services that involve the “remitting or transmitting of funds by any means or through any person, entity or electronic funds transfer network” are not considered to be MSBs because they are not engaged in the business of doing such remittance or transfers of funds.

In other words, they don’t provide the services of remitting and/or transferring funds for the sake of the service. The transfer of funds is simply a corollary of their actual service: in XYZ Inc.’s case, paying commissions on behalf of another entity. Commission payments are considered the same as payroll payments.

Based on the information provided by XYZ Inc. and described above, ABC Pay Portal is a product to transfer payroll products into the Payees’ bank accounts or to a pre-paid card. It is transferring funds as a corollary to a commission payment service. In this case, XYZ Inc. could be considered the “administrator” of the commission payments with options available to the payees receiving the commission. At this time and based on this information, XYZ Inc., with respect to ABC Pay Portal, is not subject to the PCMLTFA and its associated Regulations.

The Act states that an entity or person is an MSB if they issue or redeem money orders, traveller’s cheques or other similar negotiable instruments. The question has arisen over the meaning of “issue or redeem”.

A number of years back it was determined that if you sell any of these products, unless the products were in their name (meaning they were listed as the issuer of the product), then you were just selling the product, not issuing, and ultimately there was an agent/principal relationship involved. I believe the same interpretation was in place for the redemption part of the interpretation. It was the issuer of the product that was ultimately redeeming the product (as they were responsible for the value of the product), and that if any person or entity cashed one of these products for a customer, it did not mean they were redeeming the product, but simply cashing it.

This issue has arisen as a result of a MSB exam recently conducted whereby they admitted to having ceased FX transactions in January (conducting EFTs as an agent). Once the failure to file a cessation letter was sent, a consultant got involved and has now submitted a letter stating that the entity should still be registered as they issue/redeem money orders and travellers cheques. A conversation with the entity revealed that they cash these products for their clients (and sell them as an agent).

A had a quick look for a definition in Black’s Law Dictionary (more for my interest) and here it what is says:

“A repurchase; a buying back. The act of a vendor of property in buying it back again from the purchaser at the same or an enhanced price. The right of redemption is an agreement or action, by which the vendor reserves to himself the power of taking back the thing sold by returning the price paid for it “ I am hoping that my interpretation is correct.

In the “real world” MSBs don’t take money orders in as agents of issuers. Rather they take the money order, give the client the cash, and then take the money order along with the rest of the money made for that day and deposit it into their bank account. At that point, the bank deals with the issuer to ultimately redeem the money order and get the MSB the cash equivalent for their account.

ISSUING
To make available your business’ money orders or travellers cheques.

REDEEMING
In the context of the PCMLTFA, redeeming means for the issuing entity to repurchase the money orders or traveller’s cheques by returning the purchase price to the buyer. An example would be the buyer returning unused traveller’s cheques to the issuer.

CASHING
To accept the money orders or traveller’s cheques of an issuer and return the cash equivalent to the client. This can be done based on an agent/principle relationship with the issuer, or not.

It is important to define issuing/redeeming because this is what determines whether an entity is an MSB or not, while “cashing” triggers record keeping obligations for an entity that is an MSB.

If an entity’s business model is:

1. selling the money orders, traveller’s cheques or other similar negotiable instruments of their business, they are issuing, and are an MSB.
2. accepting unused money orders, traveller’s cheques or other similar negotiable instruments of their business, and returning the cash equivalent to the client, they are redeeming, and are an MSB.
3. selling or cashing money orders, traveller’s cheques or other similar negotiable instruments of an issuer, based on an agent/principle agreement with that issuer, the entity is doing this activity as an agent on behalf of the issuer and is not an MSB. This is assuming, of course, that the entity does not carry out other MSB-related activities (e.g., FX, EFTs or issuing/redeeming as defined above). As with any principal/agent relationship, the agent would be required to carry out the obligations as set out in the agreement between the two, but the principal would be ultimately responsible for ensuring proper application of the PCMLTFA.
4. accepting the unused money orders or traveller’s cheques of any issuer and returning the cash equivalent to the client, without an agent/principle relationship with the issuer(s), they are deemed to be cashing these money orders or traveller’s cheques and are not an MSB. That is assuming, of course, that the entity does not carry out other MSB-related activities (e.g., FX, EFTs or issuing/redeeming as defined above).
5. accepting the unused money orders or traveller’s cheques of any issuer and returning the cash equivalent to the client, without an agent/principle relationship with the issuer(s), they are deemed to be cashing these money orders or traveller’s cheques AND, if they are an MSB based on other activities carried out by the entity (e.g., FX, EFTs or issuing/redeeming as defined above), then they are subject to the MSB record keeping obligations associated with cashing, as outlined in subsection 30(d) of the PCMLTFR.
6. accepting money orders or traveller’s cheques as payment for products or services, where change in the form of cash may or may not be given, this is not considered to be redeeming or cashing a money order or traveller’s cheque, so the entity is not an MSB, nor are they subject to the record keeping obligations of an MSB (if they are an MSB) associated with cashing, as outlined in subsection 30(d) of the PCMLTFR.

XYZ Inc. provides an easy-to-use interface with support for all major mobile phones operating within Canada.

Using XYZ Inc., you can:

• Send, receive, and request money between friends, family, and co-workers
• Link your bank account to easily load funds
• Shop at stores and online, or withdraw money at ATMs, using the XYZ Inc. Prepaid credit Card
• Save time and eliminates the hassle of getting cash to pay your friends, family, and co-workers or to pay for purchases

You can use XYZ Inc. anytime, anywhere while on the go via mobile phone, online, or prepaid card.

Are these activities covered by the PCMLTFA?

Based on the information provided, namely "send, receive, and request money between friends, family, and co-workers, link your bank account to easily load funds, shop at stores and online, or withdraw money at ATMs, using the XYZ Inc. Prepaid credit Card", it appears that this entity is, at this time, engaged as a money services business in Canada, as per our Act and associated regulations, since they seem to provide remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network.

The Regulations and guidance do not explicitly state that each account number at a financial entity must be listed.

The Regulations state : “name, address, account number and branch number or transit number of every financial entity with which the applicant maintains an account for the purpose of remitting or transmitting funds”.

The Regulations only state the information for EVERY FINANCIAL ENTITY (not EVERY ACCOUNT).

I would like clarification on the matter?

The information outlined in Schedule 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Registration Regulations is information to be included in the application for registration or renewal of registration, notification of changes to information in existing application, notification of newly obtained information and clarification of information in existing application.

The intent of question 9 in Part B of Schedule 1 is to obtain, from the applicant, the account number of every bank account used by the applicant for the purpose of remitting or transmitting funds. While the reference to the name address and branch or transit number is specific to the financial entity, the reference to “account number” is specific to the applicant’s account number(s), at that financial entity, used for the purpose of remitting or transmitting funds,.

Therefore, item 9 in Part B of Schedule 1 of the MSB Registration Regulations is asking for the name, address and branch or transit number of every financial entity at which the applicant has an account or accounts for the purpose of remitting or transmitting funds AND every account number of the applicant at the financial entity or entities listed for the purpose of remitting or transmitting funds.

ABC Inc. is primarily a services oriented business, but has several different revenue models. ABC provides services and a few products that help non-profit organizations accept and manage donations.

We plan to have several revenue streams, each with a different model. They are:

Model 1 (Software as a Service): Clients subscribe to a monthly service that enables them to organize / track incoming donations. We do not manage or handle the funds in any way.

Model 2 (Direct Sales): Prior to starting their monthly subscription, clients would purchase a product directly from ABC inc.

Model 3 (Direct Rental & Processing Services): In this model we rent kiosks for accepting donations, and we also process the credit card / debit transactions. Our client (the non-profit) would pay a rental fee to have the kiosk at their event. Every donation made at the Kiosk would be processed by our merchant accounts, and the donation would be deposited into our Bank Account by the credit/debit processor. We would then forward the money along with the donor details to our client. The method of transferring the funds from our account to our clients account would be via cheque or EFT. We would then collect or hold back a fee for providing the transaction service.

We estimate that the vast majority of our revenue will be through Model 1 and 2, but we do plan to bring Model 3 online sometime in the first year of doing business as well.

ABC Ltd. (recently changed our name), is a Canadian Federally Incorporated Company, with an office in BC.

To determine if you are engaged in the money services business in Canada, I have first to determine the applicability of paragraph 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the determination of whether you have a "real and substantial connection" with Canada.

As such, some of the criteria I rely on to determine whether a person or entity is “engaged in the money services business in Canada" are for example: if the business is incorporated in Canada, if the business has agents in Canada, if the business has physical locations in Canada or if the business maintains a bank account or a server in Canada (among others).

Unless there is a substantive connection to Canada we do not consider the entity as conducting a money services business in Canada.

In this respect, could you please provide the reasons why you believe you have a sufficient presence in Canada?

Also, for your information, I am providing you with the FINTRAC Interpretation Notice, FIN 1, which provides guidance regarding who is a money services business for purposes of Part 1 of the PCMLTFA.

That being said, , it appears that your entity is engaged in the business of remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network, namely “the donation would be deposited into our Bank Account by the credit/debit processor. We would then forward the money along with the donor details to our client. The method of transferring the funds from our account to our clients account would be via cheque or EFT”. At this time, ABC Ltd. is engaged in the money services business. As such, your entity has obligations under our Law, including to be registered as a Money Services Business.

We will receive foreign currency on consignment from a major Canadian bank, to be placed into, and dispensed from, an ATM. The extent of the foreign currency transaction would be an individual using his or her debit card to withdraw foreign funds from an ATM. ABC does not and will not set any exchange rates, but simply receive the currency from the bank to be placed into an ATM.

According to the activities described, namely “ receive foreign currency on consignment from a major Canadian bank, to be placed into, and dispensed from, an ATM. The extent of the foreign currency transaction would be an individual using his or her debit card to withdraw foreign funds from an ATM. ABC does not and will not set any exchange rates, but simply receive the currency from the bank to be placed into an ATM”, these activities are not covered under our legislation, Proceeds of Crime (Money Laundering) and Terrorist Financing Act, since your entity is not engaged in the business of foreign exchange dealing, remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network, or issuing or redeeming money orders, traveller's cheques or other similar negotiable instruments (except for cheques payable to a named person or entity).

In fact, and based solely on the business model explained, it seems like you are offering the service of transport of cash from point A to point B to clients.

Please note that should your business model change in the future to expand beyond the receipt of currency from the bank to be placed into an ATM, we would appreciate you contacting us in order for us to review and reassess our interpretation to reflect these new facts.

The definition of a money services business in the Act is noted as: persons and entities engaged in the business of foreign exchange dealing, of remitting funds or transmitting funds by any means or through any person, entity or electronic funds transfer network, or of issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named person or entity;

There is additional clarification in the interpretations notice that states that a business would be exempt from MSB registration if the activity was carried out as part of another regulated activity (purchasing securities is provided as an example here).

The question in this regard is whether the MSB definition would apply to a securities dealer that is also conducting foreign exchange transactions outside of the scope of securities related purchases - are they also required to be registered as an MSB?

Should a securities dealer provide money services business (MSB) activities, such as foreign exchange, outside of their securities dealer activities, the securities dealer would be required to register as an MSB. Upon registration as an MSB, the registrant would indicate that their business is also another type of reporting entity (i.e., a securities dealer). As an MSB and a securities dealer, the entity would be subject to all applicable sections of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated regulations.

654 Cash intends to initially enter the market offering digital money transfer using our technology platform. That platform performs the following functions:

• Creation of an eWallet (customer account, etc.)
• Load/re-load eWallet – money is transferred electronically from the client’s bank account into the eWallet
• Money Transfer – the client identifies target recipient, the system generates a unique and secure PIN. The client then provides the PIN to the recipient via SMS, email or phone. The recipient visits a 654 Cash Agent who accesses the 654 Cash system, validates the PIN and provides cash to the recipient.

Our distribution channels are intended to be as follows:

• Online – via internet marketing activities such as SEO/SEM
• Mobile Application – under development, but all of the online functions can be completed from most smartphones, tablets, etc.
• Licensees & Associates – through a distribution agreement with another company, licensees and associates will promote the product and will drive their clients to the website. Unique ID's will be used to track and compensate licensee and associate activities

Fulfillment: In-country agents will be recruited either directly by the company or via referrals from individuals, clients, licensees or associates. In country cash dispensing agents will be provided with means to electronically and securely validate a PIN and will be compensated (commission) for acting as cashing agent.

As we continue to develop the platform, we intend to also offer bill payment (both domestic and international) as well as merchant payment opportunities (i.e. purchase a gift card/vouchers for a family member in another country).

It would appear that 654 Cash remits funds and transmits funds by any means or through any individual, entity or electronic funds transfer network, and appears to be engaged in foreign exchange dealing. 654 Cash is a money service business in Canada, as defined in paragraph 5(h) of the Act. It would thus appear that 654 Cash is covered by the Act and must therefore register with FINTRAC and comply with the obligations set out in the Act.

Sole proprietors, in the eyes of our law, considered persons and "not" entities, correct?

Sole proprietor is a type of business that is owned and run by one individual and in which there is no legal distinction between the owner and the business. Therefore it is considered a person as defined by Section 2 of the Act, and not an entity.

For issuance or redemption of Money Orders, traveller's cheques for example, the obligation is only triggered when the MSB enters into an service agreement. Does “ongoing” apply?

The way the text is written (both in English and in French) we can’t say that the "ongoing" applies to agreements for the issuance or redemption of Money Orders etc. However, it does have to be a "service agreement" which implies it is an agreement that covers more than just one transaction.

The conclusion is that, in practice, there is no difference between an "ongoing' service agreement and a "service agreement". It was just a drafting oversight.

Would a business that buys pre-euro banknotes be conducting "foreign exchange dealing" and therefore be "Engaged in a Money Services Business? Pre-euro banknotes (ie, French Francs, German Deutsche Marks, and Italian Lira) are not legal tender and are not traded for foreign currency anywhere in the world.

If this is considered "foreign exchange dealing", do coin/banknote collecting companies (numismatic – collection of currency/notaphilist – collecting bank notes) also fall under this category?

If the entity is collecting banknotes the RE would not qualify as a MSB.

If however, the entity is exchanging the banknotes for other currencies, they would be engaged in the money services business, namely foreign exchange. The pre-Euro banknotes are still in circulation and being bought by some Central Banks, and are considered to be currency.

Now if the entity would be buying coins that are made of precious metals - and they hit the threshold of 10,000 or more (sale or purchase) - then they would qualify as a Dealer in Precious Metals and Stones (DPMS).

ABC is a bank card transaction processor. They do credit card cash advance, debit point of sale, etc. As part of the transaction, an Integrated Payment Systems (IPS) money order is generated. There is 'no' cash in, however. All ABC transactions are 'cash out'.

In Canada, ABC has a subsidiary called 123CASH Inc. which processes transactions in Canada for casinos using the IPS money order draft. I should mention that the IPS money order draft is made payable to the casino, not the casino's patron. Once the casino cashier and patron have approved and signed off on the transaction, the casino hands out their money to the patron.

The casino handles customer identification; know your customer, etc. duties. You will find attached a diagram to make this a little easier to understand. ACM stands for Automatic Cashier Machine and it operates like an ATM. It uses built in biometrics verification and the patron has to first enrol and go through a process before use.

In the next month or two, ABC will be processing its own money order settlement drafts as opposed to IPS with casinos. In addition, some casinos will choose the non-deposit route in order to obtain replenishment funds faster.

In other words, as opposed to depositing the settlement draft check (made payable to the casino yet signed by the patron who obtained the cash), ABC will reconcile the transactions and fund via ACH casinos that choose this option. The hard copy drafts will only be used in case of disputes regarding fraud and any law enforcement requests.

Based on their business model and the information they provided us with, is ABC considered an MSB under the Act?

Based on the information you provided, we came to the conclusion that ABC would not be deemed an MSB, as they are not engaged in a money service business. Their activities are really cash advance on credit cards.

Regarding a business which transfers money an interesting thing on their money transfer service is that it seems to be offered only to their members reducing the risk for client ID (anonymity) like other online companies:

In addition,the entity goes beyond the Internet to deliver ultra-cheap mobile calls across the globe. And the entity allows their members to transfer or receive money from anywhere in the world at low cost.

Furthermore, the service is powered by an Australian company and the transfers seem to be linked to an existing bank account (debit/credit card):

The entity transfers money from your debit or credit card directly into the recipient's account, making it more convenient and faster than money orders or cheques. The transferred money is taken as a 'service' from your card rather than a cash transfer, allowing you to enjoy interest-free days and loyalty points if offered by your card provider.

If this entity has a clear and substantive connection to Canada (such as a server based here or bricks and mortar or employees etc). then yes it would have to register as a money services business with FINTRAC.

Here are the reasons why:

1. They transfer money (as in wires the money) from anywhere around the world and from any types of clients;
2. They at one point in time handles the money - as in receives the money in their "bank account" and then transfers it for the recipients;
3.  It is irrelevant if the money comes from your debit or credit card - it still travels to the entity's account and then it is wired.

1. ABC is an online payment processing provider.
    
2. Our clients are global and use credit/debit cards, ACH and EFT bank transfers, money wires and cashiers cheques to use in our system.

   We are a combined e-wallet and buy online service. Members are able to hold a balance in their online accounts with us as well as purchase products/services from qualified merchants directly.
    

3. Although anyone can signup for our services, members wishing to do any purchasing or selling are required to submit valid government issued photo ID such as a drivers license or passport as well as a recent utility bill, bank or credit card statement matching the name and address that they have registered with.

To clarify:

• our clients are only paying for products and services online.
• We do not receive funds that we then send elsewhere on behalf of a client.

ABC is an online "e-wallet" service. Clients create accounts, verify their ID, phone and address and then fund their "wallet" in order to purchase from verified online merchants.

Example:

1. Client X wants to fund their wallet with $250, so he sends us a cashiers cheque. Once his cheque has cleared, his wallet is updated and he now has $249 online spending money that he can go shopping with. (there is a $1 transaction fee for our services). He spends his $250 at 3 different online merchants.
2. Client Y wants to fund their wallet with a larger amount, so they send a bank wire for $15,000. Once the wire has been confirmed, off they go to do their online shopping. Does this larger amount require reporting?
3. Merchant Z has made $20,000 in accumulated sales over the past 2 months.

They request this amount via a bank wire and live in Florida. Would this amount require reporting and registration with FINTRAC?

Based on ABC activities in their website they would be considered an MSB. They meet the definition of an MSB as per the FIN link below.

As per their website: "Upon payment of the specified transaction fees, ABC agrees to provide you (the "End User") a service that enables the "End User" the right to use our services to send and receive monies as available in said account".

They advertise and provide transmission of money and have presence in Canada.

Two companies are newly incorporated in the Province of Alberta. These companies are buying the assets of a company incorporated in the Province of British Columbia. The new companies are going to be engaged in the lending of money to real estate agents within Canada that have made residential property sales that are in the final stages of the closing of the sale. At the point that an agent with whom we have agreed to deal with demonstrates to us that the pending sale is among other criteria, shown as sold on the MLS service, we will electronically advance from our bank account, directly to the agent’s bank account, a portion of the commission that the agent would normally receive upon the final closing of the sale. Upon the transfer of title and final closing of the residential property sale the commission paid by the vendor that would normally have been paid to the agent is now paid to us to repay the loan, interest, and other fees or charges on said loan.

At the present time, we are only considering agreeing to situations that would involve Ten Thousand Dollars or less, however, once we have our feet wet in this business it is very conceivable that situations will arise that will involve more than Ten Thousand Dollars. As well, in the future we may also start to deal with other types of real estate transactions.

Based on that information, this entity is not engaged in the business of wiring and therefore, is not an MSB.

I have an MSB who is registered, but would like to enter in a branch location. For this field, the address is mandatory, however the branch of this business is mobile (he goes to the client's house, and performs the wiring from there). As such, there is no permanent location for this "branch". How should we treat this circumstance? Which address would be required for him to fill out, if any?

Unfortunately, because it is not a fixed permanent address (as it changes with the client), the MSB cannot enter a "mobile" location as a branch. The MSB will have to provide his main address of business (in this case it may be his residential address?).