Setting up a Canadian MSB requires following various requirements set by FINTRAC. You must also establish an anti-money laundering program and appoint a compliance officer.
These requirements apply to all MSBs in Canada, but what about outside the country? If you want to understand whether location matters in the appointment of a Canadian MSB compliance officer, dive below.
What is a Compliance Officer?
A compliance officer under a Canadian MSB is a person legally responsible for fulfilling FINTRAC’s regulatory obligations. For example, they must ensure that your money service business implements anti-money laundering policies.
The officer will also be the main point of contact for FINTRAC on behalf of your MSB. They also need to be well-versed in Canadian fintech regulations to avoid issues later.Â
Does a Local Canadian MSB Require a Compliance Officer?
A local Canadian MSB must appoint a compliance officer to manage their regulatory obligations. FINTRAC requires your money service business to have a knowledgeable compliance officer.
Your local compliance officer must know the latest rules under the Proceeds of Crime and Terrorist Financing Act (PCMLTFA). They should also be aware of your business requirements according to FINTRAC.
For instance, if you’re a MSB offering custodial services in Canada, you also have to register under the Retail Payment Activities Act (RPAA). Your compliance officer must be aware of such technicalities and help you fulfill the requirements for RPAA registration.
Does a Foreign MSB Require a Compliance Officer?
It is mandatory for a foreign MSB (fMSB) to hire a compliance officer even if they’re not incorporated in Canada. FINTRAC will not approve your MSB license registration request if you don’t have a compliance officer.
The great thing about the FINTRAC MSB license is that it doesn’t require your compliance officer to be in Canada. You can hire someone in the country you’re based in or outsource a legal officer through Fractional AML service providers.
Canadian MSB Compliance Officer Requirements: Key Points by FINTRAC
You must follow Canadian MSB compliance officer requirements when appointing an individual. These include:
- Residence of Compliance Officer Doesn’t Matter, but They Must Know Canadian Laws
FINTRAC has not set any requirements on the location of your Canadian MSB’s compliance officer. Your employee can be based in one of the provinces in Canada for communication ease.
You can also hire a compliance officer outside Canada due to cost-saving and other reasons. The only requirement your MSB must fulfill is that your officer knows Canadian laws at the tip of their fingers.
If you’re hiring a foreign compliance officer who is not aware of FINTRAC regulations, your MSB will face many issues later. Your business may also end up implementing policies that contradict Canadian payment laws.
- The Officer Must Implement an AML Compliance Program
One of the main duties and requirements your compliance officer must fulfill is setting up business policies. Whether you’re a cheque casher or a payment service provider, your company must have a robust compliance program.
The compliance program is mainly designed by the officer who has in-depth knowledge of FINTRAC’s MSB regulations. They also have to update the program whenever Canadian fintech laws change.
- They Must Meet Reporting and FINTRAC Examination Obligations
Another key compliance officer requirement your MSB must fulfill is reporting obligations. Your employee must review your client transactions thoroughly and report specific transactions to FINTRAC, such as:
- Large cash transactions
- Suspicious cash transactions
- Electronic funds transfers
- Large virtual currency transactions
If your compliance officer doesn’t fulfill the reporting obligations, they will be in non-compliance with FINTRAC. This means your money service business will bear the burden of fines, debanking or other legal consequences.
FINTRAC also requires your compliance officer to be available to meet their officials whenever necessary. Businesses that don’t fulfill these Canadian MSB compliance officer requirements may lose their license. Administrative monetary penalties may also be implemented as a punishment for non-compliance.
Canadian MSB Compliance Officer Expectations by FINTRAC and Banking Partners
While FINTRAC doesn’t have any specific location requirements for compliance officers, it does have a preference. These expectations include:
- Physical Presence in Canada
A physical presence is expected from Canadian businesses, whether they qualify as a fMSB or a local MSB. This means your company must have a physical address in the country. There should also be one representative person, such as a compliance officer at the site, during business hours.
FINTRAC prefers this arrangement because:
- It makes on-site examinations easy for the agency
- Physical presence enhances the MSB’s credibility
- They want to ensure the hired officer understands Canadian laws thoroughly
Meeting this optional expectation also enhances your chances of receiving a FINTRAC MSB license.
- Robust Compliance Support
Compliance is one of the non-negotiable things under FINTRAC regulations. Your company may check all boxes of MSB registration, but if your compliance support is lacking, your application will be rejected.
Banking partners also check the compliance programs of MSBs thoroughly. The better your policies are, the easier it will be to onboard a bank, including a big 5 Canadian bank.
What to do if you don’t have a Canadian MSB Compliance Officer in the Country
If you don’t have a compliance officer at your physical office in Canada, you can outsource one. A fintech-focused law firm like Renno & Co. can offer you outsourced compliance officers who can meet FINTRAC expectations for your MSB.
You can also use outsourced officers to develop your compliance program instead of hiring a full-time employee. FINTRAC has no issues with companies outsourcing MSB compliance officers.
A fintech-focused law firm can also aid in establishing physical presence for your MSB in Canada.
Book a call to Outsource a Canadian MSB Compliance Officer and Meet FINTRAC Requirements
Fulfilling Canadian MSB compliance officer requirements is mandatory under PCMLTFA and FINTRAC regulations. If you don’t want to spend a fortune on hiring full-time employees, we can help you.
Our Fractional AML Service allows you to outsource our legal compliance officers in Canada. Connect with us today to set up your compliance program with our experienced compliance officers!
