Thanks to its stable financial and economic sphere, Canada is considered a favorable state for starting and expanding a financial business. In addition, the country’s authorities strongly support financial companies and protect their rights. This material will look at the step-by-step process of obtaining an MSB license in Canada.
Types of financial companies
Before applying for licensing, you need to understand that in this jurisdiction, financial companies are divided into two categories fundamentally different. But simultaneously, they must comply with the Proceeds of Crime Act and the Terrorist Financing Act. In addition, they need to register with the Financial Operations Center (FINTRAC), the Canadian Financial Intelligence Unit (FIU). This Center detects illicit financial activities (AML) and possible terrorist financing (ATF). The Financial Transaction Center was formed under the PCMLTFA Act and functions according to its requirements.
Let’s take a closer look at the types of financial companies.
MSB Financial Institutions
This category includes non-banking companies that operate in Canada, and the company is physically located in the territory of this state.
Let’s consider what types of financial activities relate to an MSB organization. The company offers one or more of the following services:
- making money transfers;
- conducting transactions in foreign currency;
- operations with cryptocurrency: exchange, transfers, and issuance of electronic money;
- intermediary services;
- crowdfunding services.
An MSB company must have Canadian registration and be physically located in the territory of this state. In addition, the company must hire local personnel or have branches throughout the state.
Financial institutions FMSB
These include non-bank companies operating in Canada but physically located outside of this state. This type of company conducts the same activities as MSB but with the following differences:
- no Canadian registration;
- the company is physically located outside of this state;
- the company does not have local employees, and no branches are located throughout the country.
FMSB provides financial services to individuals and legal entities or clients in Canada.
MSB License Process
Let’s look at licensing and how long each registration stage can take.
Preparation of necessary documents (up to 2 weeks)
At this stage, the company needs to collect a package of documents, develop a business project for its activities, and provide for budgeting. Ensuring compliance with AML and KYC rules in your business program is essential. The relevant authorities preliminary analyze the company’s activities based on the delivered project.
Company registration (5 weeks)
You decide on the organization’s name, rent an office based on an agreement, and resolve the issue of authorized capital. Next, collect notarized corporate documents and hire experienced employees for the company.
Opening a bank account (4 weeks)
The next step will be to prepare documents certified by a notary and conduct initial negotiations with an authorized person from the bank. Having opened an account, the company must deposit the official capital into it.
Applying licensing (2 weeks)
Before applying for a license, the company hires personnel and their adaptation. It is necessary to implement an AML and KYC policy with the appointment of responsible officers for these issues. When all the organizational problems have been resolved, an application for licensing is submitted. The Regulator may then request additional data. If everything is in order with the documents, negotiations begin with FINTRAC and verification of compliance with their requirements.
Issuance of permission to conduct financial activities (4 weeks)
FINTRAC carries out a final check of the submitted package of documents. The company fully supports the licensing process until the issuance of an MSB license.
Requirements for issuing an MSB permit
The first thing is that the company’s office must be located in Canada and registered with FINTRAC. It is essential to implement programs to combat illegal financial transfers and foresee possible risks that could undermine the organization’s activities. Reliable software protection with multi-level client identification is of great importance.
All managers must have a clean reputation (provide relevant certificates from the state of which he is a citizen). The management team must have a financial education (with confirmation of diplomas and certificates). The licensing process can be simple, but it is critical to comply with all requirements imposed by the Regulator.