How to run a Successful MSB/fMSB in Canada

Discover the essential steps to successfully run an MSB or fMSB in Canada. Learn 10 steps to ensure the success of your business. Know more on how to meet all legal requirements with our comprehensive compliance guide and team of experts.

Fintech Team
June 14, 2024

Canada is witnessing the rise of Money Services Businesses (MSBs) and Foreign Money Services Businesses (fMSBs). The increasing demand for immediate, reliable money service has given entrepreneurs an opportunity to enter this rapidly growing field.

The Future of Money Moving (2022) projects a 25% increase in registered MSBs by 2025, driven by digital payments and cross-border transactions.

As per the report by FINTRAC, there is a significant increase in enrollment of MSBs. The demand of this sector is increasing day by day because it is to serve the requirements of financial services which are expanding and reaching domestic and global customers.

For instance, companies working on remittance services for immigrant communities/families that need to send cash to their loved ones abroad make sure that the cash gets to the family member fast and with minimal fees.

On the other hand, there are multitude of other players that are staking a claim in a highly lucrative space of cryptocurrency exchange platforms.

These businesses are thriving financially but at the same time they also contribute to the global financial ecosystem by supporting economic activities.

Why Canada? 

Canada is one such territory that is highly advantageous for new Money Service Businesses (MSBs) to launch.

The country has a market that is enormous, diverse and dynamic. It has a strong regulatory framework that also nurtures an ecosystem of financial innovation. Here are a few reasons why entrepreneurs should be more bullish on Canada as a place to launch their MSBs:

1. Business Stability & Certainty

MSBs require stable and rules-based regulation to thrive; and Canada has long been recognized for the regulatory environment it provides.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) monitors MSBs compliance with the strict anti-money laundering (AML) and counter-terrorist financing (CTF) regulation.

The strict regulatory oversight ensures that MSBs stay compliant and helps to build trust with customers and partners.

2. Increased Demand for Financial Services

Canada is experiencing a demand surge for a wider range of financial services. The factors influencing this are rising immigration, cross-border trade, and the increased acceptance of digital currencies.

The country right now has one of the most diverse populations in the world. In such a multicultural society, the need for remittance services, currency exchange, and digital payment solutions hold a lot of importance.

This has created an opportunity for entrepreneurs to offer tailor-fitted financial solutions that suit different communities.

3. Support Innovation In Finances

Programs such as the Canadian Technology Accelerator, and different provincial innovation hubs, offer MSBs, along with fintech startups - resources, mentorship, and access to funding.

The focus on aiding innovation in the country provides a great advantage to entrepreneurs looking to enter revolutionary financial technologies.

Beyond this, Canada has a well-established tech ecosystem and high levels of internet penetration which has paved the way for MSBs to offer digital financial services efficiently.

Key Requirements for MSB/fMSB Success in Canada

1. Create a Business Plan

It is essential to have a clear business plan for defining the goals, audience, competition, and expansion methods of your MSB/fMSB.

The plan should highlight and incorporate risk management strategies to showcase your cooperation with regulatory compliance.

2. Assess the Risk

Conducting a thorough risk assessment is crucial for recognizing and reducing possible weaknesses.

This evaluation needs to address client background checks, tracking of transactions, location-based risks, and upcoming regulations.

3. Develop AML Policies and Protocols

Your primary bank/financial institution must develop and consistently revise Anti-Money Laundering (AML) protocols and processes that are customized to your particular business operations.

The protocols should detail your entire compliance program, including steps for customer identification, reporting suspicious transactions, maintaining records, and training staff.

4. Understand Compliance Guidelines

It is crucial to have access to compliance experts and lawyers who are knowledgeable about Canadian AML laws. 

They are able to assist you in staying updated on regulatory changes and handling communications with FINTRAC and other regulators.

5. Get dedicated Compliance Officer

You need to assign a qualified compliance officer who understands Canadian AML regulations to supervise your compliance program.

It is required to always document a written Anti-Money Laundering (AML) compliance program.

Get a fractional AML officer to craft your policies.

6. Conduct Regular AML Audits

MSBs and fMSBs are regulated by a federal authority in Canada - Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).It is their duty to fight against financial crimes.

Thus, it is recommended to perform AML audits every two years to evaluate the efficiency of your compliance strategies and pinpoint areas that need improvement.

This will help you in mitigating any possible risks. 

7. Set Up Bank Accounts

It is recommended to shortlist or select the financial institutions that already have knowledge of MSB/fMSB regulations.

This step can help you simplify the account creation process and reduce compliance hurdles.

8. Draft Documents and Agreements

Always follow proper documentation, in order to prevent yourself from becoming a part of anything illegal.

It is important for all the license holders to keep thorough records of such as terms of service, privacy policies, service agreements, and non-disclosure agreements, and comply with all the regulations.

9. Leverage Connector/Referral Services

Invest time in creating strategic alliances with a group of reputable vendors and professionals that can grant entry to key resources like workforce solutions, tech suppliers, and compliance specialists. 

10. Train your employees

Give employees consistent training to improve their understanding of AML/CTF obligations and their involvement in adhering to regulations.

Also, maintain records proving that your staff has been properly trained in these protocols.

The Fintech Team at Renno & Co. understand that staying in compliance requires thorough and constant vigilance, adaptability, and a proactive mindset.

We at Renno & Co. have a team of experienced compliance officers to support you navigate through the regulations and protocols. We provide a team of experts exclusively to you to develop a solution that aligns with your specific business model, risk profile, and growth objectives. We can help you at every step to make sure that you are able to run a successful business without any roadblocks. 

Click here if you would like to learn more about our services.

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*The content on this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.

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