All Money Service Businesses (MSBs) in Canada have legal obligations under the Proceeds of Crime (Money Laundering) Terrorist Financing Act and must be registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
A money service business refers to a person or entity that engages in foreign exchange dealing, remitting or transmitting funds, issuing or redeeming money orders, traveller’s cheques and other similar negotiable instruments (but doesn’t include cashing cheques made out to a particular individual or entity), and also includes alternative money remittance systems.
Under the Proceeds of Crime (Money Laundering) Terrorist Financing Act (PCMLTFA), MSBs have numerous legal obligations. Reporting obligations relate to suspicious transactions, terrorist property, large cash transactions, and electronic funds transfers. There are also record keeping obligations relating to a multitude of issues. Other legal obligations involve ascertaining the identity of various individuals and entities, making determinations with respect to politically exposed foreign persons, making “third party” determinations and creating and implementing a compliance regime.
Failure to comply with the legal obligations under the PCMLTFA can draw unwanted attention from FINTRAC and can lead to criminal or administrative penalties.
The PCMLTFA currently allows for maximum administrative penalties of $100,000 for an individual per violation and $500,000 for an entity per violation. On the criminal side, the maximum fine is set at $2,000,000 and the maximum jail sentence is 5 years.
The legal obligations for MSBs are real and the consequences can be serious. Make sure your MSB is ready for FINTRAC.