How to Apply for a Money Transfer License in Canada

Launching a Money Services Business (MSB) in Canada is a significant step for companies looking to offer financial services like money transfers, currency exchange, and virtual asset transactions. However, securing an MSB licence involves adhering to Canada’s stringent regulations, following specific steps, and meeting compliance requirements. This guide outlines everything you need to know about obtaining an MSB licence, including costs, timelines, and ongoing responsibilities.

Why Canada is an Ideal Destination for Your Money Transfer Business

Canada stands out as one of the most stable and well-regulated markets for financial services. Here’s why it’s a preferred destination:

1. Strong Regulatory Standards

Canada’s financial system is governed by rigorous standards that ensure transparency and security. This helps build customer trust and provides businesses with a strong framework for sustainable operations.

2. Global Market Access

An MSB licence in Canada allows businesses to serve international clients, offering flexibility and growth opportunities. However, certain jurisdictions, such as the United States, may have advertising restrictions that businesses must adhere to.

3. Flexible Operating Options

• Foreign MSBs can operate without establishing a physical presence in Canada, provided they do not specifically target Canadian customers.
• Domestic MSBs benefit from having a local presence, which simplifies compliance processes and facilitates bank account setup.

What is a Money Transfer License?

A Money Transfer License, or MSB licence, is a regulatory authorisation that allows businesses to conduct activities such as:

• Money transfers within Canada or internationally.
• Currency exchange services.
• Transactions involving virtual assets, like cryptocurrencies.

This licence ensures that businesses adhere to Canada’s compliance requirements, safeguarding customers and preventing illegal activities.

Step-by-Step Guide to Obtaining an MSB License in Canada

Step 1: Determine the Type of License You Need

There are two main types of MSB licences in Canada:

• Domestic MSB Licence: Required for businesses that target Canadian clients and typically involves establishing a local presence.
• Foreign MSB Licence: Designed for companies operating internationally without targeting customers in Canada directly.

Step 2: Prepare Key Business Documentation

To start the application process, gather the following documents:

• Certificate of Incorporation: Verifies your business is legally registered.
• AML/KYC Policies: Detailed anti-money laundering and know-your-customer protocols customised for your operations.
• Corporate Structure Details: Includes information about your directors, shareholders, and overall organisational setup.
• Financial Statements: Evidence that your business has sufficient resources to operate effectively.
• Compliance Officer Information: Appoint a knowledgeable Chief Compliance Officer to oversee your adherence to Canadian regulations.

Step 3: Submit Your Application

Once your documents are ready, complete and submit the application form, along with the required government fee of 2,500 CAD.

Step 4: Undergo Regulatory Review

The application will be reviewed to ensure compliance with all regulatory requirements. This step often involves back-and-forth communication to address any questions or provide additional documentation.

Step 5: Receive Approval and Begin Operations

Upon approval, your MSB licence will be issued, enabling your business to operate legally and expand its services.

How Long Does It Take to Get an MSB License?

The licensing process typically takes 3 to 5 months, depending on the completeness of your documentation, the complexity of your application, and your chosen service package.

Costs of Obtaining an MSB License

The cost of securing an MSB licence varies based on the level of support and customisation you require:

• Custom Licensing Packages: Ranges from 13,100 to 20,200 CAD (12,000–15,000 EUR).
• Ready-Made MSB Companies: Pre-approved licences with fully established businesses are available for 25,000 EUR, offering a faster path to market entry.

What’s Included in a Ready-Made MSB Package?

• Fully registered and operational company.
• AML/KYC policies tailored to your business needs.
• Assistance with bank account setup.
• Ownership transfer under your name.
• Appointment of a Chief Compliance Officer.
• Support with all necessary communications and filings.

Compliance with the Retail Payment Activities Act (RPAA)

The Retail Payment Activities Act (RPAA), which takes effect in November 2024, introduces additional compliance requirements for businesses involved in:

• Holding customer funds.
• Processing electronic fund transfers.
• Clearing and settlement services.
• Providing customer accounts for payment-related activities.

Key Deadlines for RPAA Compliance

Existing Companies:

• Submit applications between November 1–15, 2024, to avoid service disruptions.
• Late submissions will result in a mandatory 60-day suspension of payment functions.

New Applicants:

• Submit the required questionnaire between November 16, 2024, and September 1, 2025.
• Allow for a 60-day review period and prepare any additional legal documentation by September 2025.

Ongoing Maintenance Costs

Operating an MSB comes with recurring obligations to ensure smooth and compliant operations:

1. AML Officer

• Cost: 1,000 USD/month for a part-time compliance specialist.
• Role: Ensures ongoing adherence to regulations, managing compliance tasks for up to 5 hours per month.

2. Local Office

• Cost: Between 1,000 and 15,000 USD/month, depending on the office type and location.

3. Tax Advisory Services

• Cost: Varies based on the complexity and structure of your business.

Common Challenges and Solutions

1. Navigating Complex Regulations

• Challenge: Meeting all compliance requirements can be overwhelming.
• Solution: Work with experts who specialise in MSB licensing to ensure a smooth process.

2. Setting Up a Bank Account

• Challenge: Banks may require additional documentation for MSBs.
• Solution: Establish a local office and appoint a local director to simplify the process.

3. Delays in Licensing Approval

• Challenge: Licensing reviews can take longer than expected.
• Solution: Consider purchasing a ready-made company with a pre-approved license for faster market entry.

Conclusion

Securing a Money Transfer License in Canada is a meticulous but rewarding process that allows businesses to expand their financial services while ensuring compliance with some of the world’s most stringent regulations. With the right preparation and support, you can navigate the licensing journey efficiently and position your business for success in the global market.

If you’re ready to take the next step, consider tailored support or ready-made solutions to simplify the process and achieve your business goals faster.