On July 10, 2019, amendments were made to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and regulations to clarify and strengthen the obligations of Foreign Money Services Businesses (FMSBs). The regulatory amendments require businesses that conduct money services business (MSB) activities directed towards Canadians from outside of Canada to classify themselves as FMSBs and comply with Canadian anti-money laundering requirements. Under the new amendments, which came into effect June 1, 2021, FMSBs will have the same obligations as ‎domestic MSBs when they provide one of the listed services directed at individuals located in Canada.

What is a money services business?

A business or enterprise is considered an MSB in Canada if they offer any of the following services:

• Foreign exchange dealing
• Remitting or transmitting funds
• Issuing or redeeming money order or similar negotiable instruments
• Dealing in virtual currency

What is a foreign money services business?

A business or enterprise is considered an FMSB if it meets all of the following criteria:

• The business provides at least one money services business (MSB) service
• The business does not have a place of business in Canada
• The business directs its MSB services at persons or entities in Canada
• The business provides these services to clients in Canada

A business is considered to be directing services at persons or entities in Canada if at least one of the following applies:

• The business’s marketing or advertising is directed at persons or entities located in Canada
• The business operates a “.ca” domain name
• The business is listed in a Canadian business directory

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) defines directing services to mean the services offered take into consideration a Canadian audience. For example, marketing and advertising materials that are distributed, with the intent to acquire business from individuals within Canada. The term “direct” seems quite open-ended as to how it will be interpreted; at a minimum, it sets the requirements above simply having a Canadian bank account, which was previously sufficient to give FINTRAC jurisdiction over non-residential FMSBs. ‎

Summary of requirements for FMSBs

In response to these new amendments, FINTRAC has issued guidance for FMSBs, which came into effect the same day as the new regulation (June 1, 2021).

Penalties for non-compliance

FINTRAC has the legislative authority to issue administrative monetary penalties (AMPs) to businesses that are found to be non-compliant with the PCMLTFA and associated regulations. 

Conclusion

These new amendments impose increased obligations for foreign entities carrying on money services businesses that operate or target individuals within Canada. Given the scope of these changes, newly-regulated entities will need to implement a considerable overhaul of their compliance policies and procedures. For the time being, FINTRAC will be exercising flexibility in assessing and enforcing compliance with certain reporting responsibilities related to the amended Regulations, but nevertheless, FMSBs need to quickly reorient their compliance programs to meet their new PCMLTFA obligations.