With RPAA deadlines and timelines looming, most money service businesses (MSBs) must prepare to register their businesses with the Bank of Canada as soon as possible. However, you might wonder whether your MSB needs to get registered under the Retail Payment Protection Act (RPAA).
The Renno & Co's Fintech team has created a comprehensive guide to help you understand who needs a Bank of Canada registration under the RPAA and who doesn't. For detailed information, keep reading our guide.
What is Bank of Canada RPAA Registration?
Payment service providers (PSPs) in Canada are required to fulfill federal compliance requirements by registering with the Bank of Canada under the RPAA. Compliance with the act is essential to legally operate in the country and counter finance-related crimes.
Businesses that qualify as PSPs include:
Businesses That Require Bank of Canada Registration under the RPAA
For the most part (with some limited exceptions), Canadian companies providing payment services will need to register under the RPAA. As such, the following business models are likely captured:
- Payment Service Providers (PSPs)
- Account Providers (e.g., if you're holding client funds)
- Remittance Companies
- Multi-Currency Account Providers
- Payment Gateway Providers
- Merchant Account Providers
If your business model falls within this category, you must register under the RPAA. Note that most of these businesses also need to register their MSB with FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) before applying for RPAA registration.
MSBs That Don't Require Bank of Canada Registration
The following MSB may not trigger Bank of Canada registration requirements:
- ATM-type businesses (including crypto ATMs)
- Brick-and-mortar currency exchange
- Non-custodial crypto exchange
- Custodial crypto exchange (although these companies will need to register with securities regulators)
However, please remember that even if one of the above is your primary product offering, adding a payment service as a small "add-on" to your existing product may still be captured under the RPAA.
For instance, if ExchangeCo operates a crypto exchange and adds a feature that allows users to pay their fiat bills using their crypto holdings with ExchangeCo, this "add-on" may require ExchangeCo to register its business with the Bank of Canada.
You can verify whether your business is on the FINTRAC list of MSBs in Canada to confirm your current registration status.
MSB Registration vs RPAA Registration: What's the Difference?
Money service business registration and RPAA registration are different regulatory steps that fintech businesses must take, depending on their eligibility. Let's look at the differences between the two to help you understand better:
Regulatory Agency
Canadian MSBs must comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in the country. FINTRAC is the regulatory agency that oversees businesses falling under the PCMLTFA and ensures they're compliant with anti-money laundering (AML) regulations. This is why all MSBs must complete FINTRAC MSB registration to operate in Canada legally.
Meanwhile, payment service providers must comply with the Retail Payment Activities Act in the country. The Bank of Canada oversees all PSPs that fall under the RPAA and ensures they're complying with key regulations. So while both MSB registration and RPAA registration cover fintech compliance, they are both governed under different federal laws and regulatory agencies.
If your business offers services that fall under the qualification criteria of MSBs and PSPs, you must complete both registrations. Compliance with FINTRAC does not necessarily mean compliance with the RPAA and the Bank of Canada.
Type of Business
Another key difference between the two registration processes is the type of businesses requiring them. Money service businesses in Canada are only required to register with FINTRAC for compliance with the PCMLTFA. Meanwhile, payment service providers must complete RPAA registration for compliance with the RPAA.
If you're an MSB offering retail payment services, such as sending remittances for clients, you will have to register with FINTRAC and the Bank of Canada. Similarly, if you're a PSP offering money services such as the issuance of money orders for clients, you'll have to complete FINTRAC MSB registration and Bank of Canada RPAA registration.
Understanding your business's classification according to PCMLTFA and RPAA regulations will help you determine the type of registration you must complete for efficient operations.
Registration Timelines
FINTRAC MSB registration and Bank of Canada RPAA registration are two different processes with separate portals for application, registration renewal, and other related tasks. Both registrations are reviewed by different agencies, which is why their timelines also vary.
Typically, MSB registration with FINTRAC can take five to six months, depending on the completeness of your application. With Bank of Canada RPAA registration, there is no fixed timeline because the review process varies business by business. Sometimes it may take months for RPAA registration, but on other occasions, the process may be lengthier.
Consulting a fintech law firm for MSB registration and RPAA registration timelines may help you understand the two processes better.
Registration Cost
Money service business registration Canada is free because FINTRAC charges zero dollars for applications, but the overall process may have some costs attached. Meanwhile, Bank of Canada RPAA registration comes with a non-refundable registration fee of $2,500 CAD.
All money service businesses are required to develop a compliance program and appoint a compliance officer under the PCMLTFA. These details must be shared during the registration process with FINTRAC for a thorough application review. You may hire a fintech law firm to help you with these anti-money laundering (AML) compliance measures, which can add to the cost of the MSB registration process.
Similarly, you may have to seek a consultation from a law firm for RPAA registration and compliance with the Bank of Canada regulations. A fintech lawyer's fee will be an additional expense during the RPAA registration, along with the mandatory $2,500 CAD fee set by the Bank of Canada.
Renewal Requirements
Money service business registration Canada and RPAA registration are not one-time procedures. MSBs and PSPs must renew their registration as per the guidelines to continue operating in Canada. All money service businesses have to renew their FINTRAC MSB registration every two years.
If MSBs fail to renew their registration, their status may change from active to expired in the FINTRAC MSB registry. Meanwhile, PSPs don't have to follow a standard renewal timeline for keeping registration active.
Instead, they must engage in annual reporting and ensure their records, internal policies, and new tools are compliant with the RPAA. When PSPs lack in annual reporting, their registration status may change from active to revoked or expired in the Bank of Canada PSP registry.
How to Register PSP in Canada?
All PSPs are required to visit the Bank of Canada website to register with the PSP Connect portal created by the bank. Once you're registered, you can start your RPAA registration application and submit the form after filling out key details.
You will also have to pay the non-refundable fee of $2,500 CAD upon completing the application. Once your payment is done, the Bank of Canada will start the screening process of your PSP to determine whether to approve or reject your RPAA registration application.
Note that you must halt PSP operations when applying for RPAA registration. Businesses that operate without active registration may face non-compliance penalties. If your PSP falls under the scope of the PCMLTFA, you must also register as an MSB in Canada.
How to Register MSB in Canada?
PSPs that qualify as MSBs must complete money service business registration Canada. You must visit the official FINTRAC website to fill out and submit the pre-registration form with the agency. They will review the request and send you an email containing the link to your application form.
Once you submit the application form, you will have to wait for a response from FINTRAC before starting operations. The MSB registration process is the same for local MSBs and foreign MSBs (fMSBs) in Canada.
What is the Difference Between MSB and fMSB in Canada?
FINTRAC classifies money service businesses into two groups, both of which must complete MSB registration if they're eligible. Local MSBs are those that conduct transactions within Canada and have a place of business in the country.
fMSBs are those that may not have a location within Canada but serve clients in the country. Such companies usually engage in cross-border transactions, subject to added oversight by FINTRAC due to the high risk of financial crimes.
You must know whether your MSB falls under the local MSB or fMSB classification for thorough compliance with the PCMLTFA. If you're already registered with FINTRAC but confused about your MSB classification criteria, you may open the FINTRAC MSB registry and see which group is mentioned with your company name.
Penalties for Non-Compliance with MSB Registration in Canada
If you fail to register by the deadline set by the Bank of Canada, you may have to pay fines that start from $1 million.
Also, MSBs that have failed to register as PSPs with the Bank of Canada will be prohibited from performing any payment functions until they complete their registration. According to the Bank of Canada, there may even be operational halts imposed on these "late-to-register" MSBs for up to two months.
Banking and liquidity providers for your MSB may not tolerate your MSB falling out of RPAA compliance and decide to stop serving your MSB completely as a result.
Non-compliance can result in a series of negative implications for your business, from de-banking to 60-day operational freezes and heavy fines. If you're unsure about your compliance status, connect with our compliance officers and lawyers to discuss your RPAA registration requirements.
How Renno & Co Can Help You with RPAA Registration
As a part of the RPAA registration, our compliance officers and lawyers help our clients throughout the process.
Here is what you can expect from our RPAA registration services:
Registration Strategy
We will develop a strategic plan to navigate the RPAA registration process effectively, ensuring all prerequisites and regulatory expectations are met prior to application submission.
Full Documentation Support
We will assist in preparing and organizing all necessary documentation as mandated by the RPAA, including business structure diagrams, operational scopes, and detailed profiles of key management personnel.
Regulatory Advice and Planning
We will offer ongoing regulatory advice throughout the engagement to ensure your business model aligns with RPAA requirements and you are well-prepared to comply with your RPAA requirements.
Direct Representation with the Bank of Canada
We will act as your representative in all communications with the Bank of Canada, managing the submission of your registration application and ensuring effective dialogue throughout the process.
Application Submission
We will gather the required information from you and ensure that your application is properly submitted to the Bank of Canada within the prescribed registration window.
Regulatory Query Assistance
Assist with handling and responding to follow-up questions from the Bank of Canada regarding your RPAA registration application. This service focuses on clarifying and resolving specific inquiries to ensure all compliance concerns are addressed promptly and accurately.
Risk Management Framework Guidance
We will provide introductory guidance on the RPAA's requirements for having a written framework covering risk management and incident response. We will consult with you on the essential elements needed in a compliant plan, equipping you with the foundational knowledge to prepare your written risk frameworks. Under the Premium package, we will prepare your written frameworks ourselves!
Risk Management Framework Development
We will craft a detailed and comprehensive written risk management and incident response framework that specifically addresses the unique risks associated with your business model and operational specifics under the RPAA.
FAQs
Do all MSBs in Canada need RPAA registration with the Bank of Canada?
No, every MSB doesn't automatically fall under the RPAA. The requirement depends on whether your business performs retail payment activities as defined by the Bank of Canada. For example, remittance businesses, payment processors, and merchant account providers are often captured, while some crypto ATMs and brick-and-mortar currency exchanges may not qualify as a PSP.
Does a crypto business need RPAA registration in Canada?
It depends on the business model. Non-custodial crypto exchanges and crypto ATM operators may not require RPAA registration in certain cases. However, if the business offers payment-related features, such as bill payments or fiat transfers, RPAA obligations may apply.
Can a PSP operate while waiting for RPAA approval?
Businesses that are required to register under the RPAA must follow the Bank of Canada's registration requirements and timelines carefully. Operating without proper registration may expose your PSP to regulatory penalties or operational restrictions.
How long does RPAA registration take?
There is no fixed processing timeline for RPAA registration. The Bank of Canada reviews each application individually, and timelines can vary depending on the complexity of the business model and the completeness of the submission.
What happens if my business misses the RPAA registration deadline?
Missing key RPAA dates can lead to non-compliance with the Bank of Canada regulations. The consequences of non-compliance may include administrative penalties, operational interruptions, and possible banking relationship challenges.
Contact Renno & Co. Fintech Today to Meet All RPAA Registration Requirements and Stay Compliant!
While general guidelines on RPAA registration exist, the practical landscape is much more complex. If you are still confused about whether your MSB requires RPAA registration or not, you can connect with our team for a definitive plan forward.
At Renno & Co. Fintech, we help Canadian and foreign businesses seamlessly set up Fintech businesses in Canada in a legal and compliant fashion. Schedule a free consultation with our team today.
Disclaimer: This content is for informational purposes only and does not constitute legal advice.
