Money Services Businesses (MSBs) and Foreign Money Services Businesses (fMSBs) in Canada work under strict regulations aimed at preventing money laundering and terrorist financing.
One of the cornerstones of these regulations is to ensure impeccable documentation and rigorous reporting. And that is why it is important for all the license holders to keep thorough records of every transaction, client details, and comply with all the regulations.
Reporting mandates the submission of specific data around transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). It is FINTRAC’s duty to fight against financial crimes and make sure that the funds passing through them are legitimate and lawful.
Here are the essential record keeping and reporting requirements for MSBs and fMSBs in Canada:
Ten record keeping regulations for MSBs/fMSBs licensee in Canada
Here are the key regulatory measures MSBs and fMSBs must focus on:
1. Customer Identification
Always record basic details of the customers like their name, address, date of birth, and occupation. The maintenance of records will help in confirming the identity of the customer and mitigating the risks around money laundering and terrorist financing.
2. Business Relationship
It is of utmost importance to keep a record of the details of all business partnerships with the customer. Also, always document how they are planning on using the account. This data will help in decoding the client's financial behaviors and foreseeing risks.
3. Written Compliance Program
Always document a written Anti-Money Laundering (AML) compliance program. It is required for you to outline all AML policies and procedures such as transaction monitoring, customer identification, reporting, etc.
4. Beneficial Ownership
As mentioned and suggested in the first point, always keep a record of the names and addresses. This includes beneficial owners (who own 25% or more), directors, trustees, beneficiaries, or settlers of entity clients such as corporations and trusts.
5. Third-Party Determination
It is important to identify and record details of all the parties involved for transactions exceeding $10,000 in virtual currency. It is recommended to always confirm if the party is acting on behalf of someone else/a third-party.
6. Politically Exposed Persons (PEP) and Heads of International Organizations (HIO)
If a client is identified as a PEP or HIO, it is of utmost importance to record all the information related to their position/title and source of income.
7. Transaction Records
Maintain thorough records of transactions that exceed a limit of $1,000. It is required to note down the date, amount, type of currency, and names of those involved. This data helps in detecting and investigating any suspicious activities.
8. Account Records
Always document accounts created and managed by the customers, as well as all the transactions linked to them.
9. Employee Training Records
Maintain records proving that your staff has been properly trained in anti-money laundering (AML) and counter-terrorist financing (CTF) protocols.
10. Report Copies
Always keep duplicate copies of all the reports submitted to FINTRAC. This includes suspicious transaction reports, terrorism related reports, large cash transaction reports, large virtual currency transaction reports, and electronic funds transfer reports.
Record Retention Period
All records must be retained for a minimum of five years.
MSBs and fMSBs must report certain transactions to FINTRAC to help detect and prevent financial crimes.
Here are the Reporting Requirements for MSBs/fMSBs: A Comprehensive Checklist
MSBs and fMSBs must report certain transactions to FINTRAC to help detect and prevent financial crimes:
1. Suspicious Transaction Reports (STRs)
These reports must be submitted, whenever there is a doubt. It can include activities related to money laundering or terrorist financing.
Filing Timeline: STRs should be filed as soon as you form a suspicion, without undue delay.
2. Terrorist Property Reports (TPRs)
These reports must be submitted if you discover property belonging to or under the control of a terrorist or terrorist group, or if you have reason to believe that there is a connection.
Filing Timeline: TPRs should be filed as soon as you form a suspicion, without undue delay.
3. Large Cash Transaction Reports (LCTRs)
These are essential for monitoring substantial cash transactions. It helps prevent large-scale money laundering activities.
Limit for transactions: Any single transaction over $10,000 CAD. Reporting is required for multiple smaller transactions that total $10,000 CAD or above in a 24-hour period.
Filing Timeline: Within 15 calendar days of the transaction.
4. Large Virtual Currency Transaction Reports (LVCTR)
These play a crucial role in monitoring significant digital asset transactions and preventing illegal transactions of virtual currencies.
Limit for transactions: Any single transaction over $10,000 CAD. Reporting is required for multiple smaller transactions that total $10,000 CAD or above in a 24-hour period.
Filing Timeline: Within 5 calendar days of the transaction.
5. Electronic Funds Transfer Reports (EFTRs)
These reports aid in identifying and halting the transfer of illegal money across borders.
Limit for transactions: Any single international transaction over $10,000 CAD. Reporting is required for multiple international smaller transactions that total $10,000 CAD or above in a 24-hour period.
Filing Timeline: Within 5 calendar days of the transaction.
The 24-Hour Rule
The 24-hour rule is essential for ensuring accurate reporting of large financial transactions, helping to prevent money laundering and terrorist financing.
This rule requires that multiple transactions of the same type be aggregated and treated as a single transaction if they:
- Total $10,000 or More: Combined transactions meet or exceed $10,000 CAD.
- Occur Within 24 Hours: Transactions happen within a consecutive 24-hour period.
- Same aggregation type: Conductor, beneficiary or on behalf of (third party)
The Fintech Team at Renno & Co. understand that staying in compliance requires thorough and constant vigilance, adaptability, and a proactive mindset.
We provide exclusive packages for all your Legal and Compliance needs, so that you can focus on serving your customers and expanding your business.
