Regulatory Compliance for MSBs and FMSBs in Canada: Essential Record-Keeping and Reporting Requirements
Money Services Businesses (MSBs) and Foreign Money Services Businesses (FMSBs) operating in Canada are subject to stringent regulations designed to combat financial crimes, including money laundering and terrorist financing.
A fundamental aspect of these regulations is maintaining accurate records and ensuring timely reporting. License holders must diligently document all transactions, store client information securely, and adhere to regulatory mandates.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) oversees these compliance measures, ensuring that financial transactions remain transparent and legitimate. Below is an outline of the key record-keeping and reporting obligations that MSBs and FMSBs must fulfill.
Record-Keeping Requirements for MSBs and FMSBs
To maintain compliance, MSBs and FMSBs must adhere to the following record-keeping standards:
Customer Identification
Businesses must document essential details about their customers, including full name, address, date of birth, and occupation. This data helps verify identities and mitigate financial crime risks.Business Relationship Records
Companies must maintain documentation of their relationships with customers, including how accounts are utilized. This assists in analyzing financial behaviors and assessing risk factors.Written Compliance Program
A formal Anti-Money Laundering (AML) compliance program must be documented, detailing procedures such as transaction monitoring, customer due diligence, and reporting protocols.Beneficial Ownership Records
Firms should maintain details on beneficial owners (individuals holding 25% or more of an entity), including names and addresses of directors, trustees, and stakeholders in corporations and trusts.Third-Party Involvement
For transactions exceeding $10,000 in virtual currency, businesses must determine whether a third party is involved and document the details accordingly.Politically Exposed Persons (PEPs) and International Organization Heads (HIOs)
If a client is classified as a PEP or HIO, their title, position, and source of funds must be recorded.Transaction Records
Any transaction exceeding $1,000 must be documented, including date, amount, currency type, and parties involved, to aid in detecting suspicious activities.Account Activity Records
Businesses must document all accounts created by customers and maintain records of associated transactions.Employee Training Documentation
Records must be kept to verify that staff members receive proper AML and counter-terrorist financing (CTF) training.Retention of Report Copies
Businesses must retain duplicate copies of reports submitted to FINTRAC, including those related to suspicious transactions, large cash transactions, and electronic funds transfers.
Retention Period: All records must be preserved for a minimum of five years.
Reporting Obligations for MSBs and FMSBs
MSBs and FMSBs must submit reports to FINTRAC to assist in detecting and preventing illicit financial activities. The key reporting requirements include:
Suspicious Transaction Reports (STRs)
Businesses must report transactions suspected of involving money laundering or terrorist financing.Submission Deadline: As soon as suspicion arises, without unnecessary delay.
Terrorist Property Reports (TPRs)
If a business identifies property owned or controlled by a terrorist entity, a report must be filed.Submission Deadline: Immediately upon identification, without undue delay.
Large Cash Transaction Reports (LCTRs)
Transactions involving cash amounts exceeding $10,000 CAD must be reported.Reporting Threshold: A single transaction over $10,000 CAD or multiple transactions totaling this amount within 24 hours.
Submission Deadline: Within 15 calendar days of the transaction.
Large Virtual Currency Transaction Reports (LVCTRs)
Businesses must report virtual currency transactions over $10,000 CAD.Reporting Threshold: A single transaction above $10,000 CAD or multiple transactions totaling this amount within 24 hours.
Submission Deadline: Within 5 calendar days of the transaction.
Electronic Funds Transfer Reports (EFTRs)
International transactions exceeding $10,000 CAD require reporting.Reporting Threshold: A single cross-border transfer over $10,000 CAD or multiple transfers meeting this threshold within 24 hours.
Submission Deadline: Within 5 calendar days of the transaction.
Understanding the 24-Hour Rule
To enhance accuracy in reporting large transactions, businesses must aggregate multiple transactions of the same type if:
They total $10,000 CAD or more.
They occur within a consecutive 24-hour period.
They involve the same conductor, beneficiary, or third party.
By adhering to these stringent compliance measures, MSBs and FMSBs can ensure transparency and contribute to the fight against financial crimes in Canada.
