FINTRAC and an anti-money laundering regime‎

ELI Canada

The Anti–Money Laundering Regime modifications were announced by the Canadian Department of Finances in the spring of 2022. The proposed changes make firms subject to the current regulations under the PCMLTF Act.

Providers of payment services

The PCMLTF Act has included certain PSPs by removing the exemption for the payouts for credit, debit, and prepaid items to the concept of “electronic funds transfer”. This added support to FINTRAC’s reading of the terms and conditions that the PCMLTFA was not intended to apply to specific merchant services operations, such as those where the transferring of cash is only a byproduct of their genuine service. For instance, FINTRAC’s earlier opinion was that a firm was not to be regarded as an MSB if it offered salary and commission activities since sending money was seen as a natural extension of that company.

FINTRAC, however, recently updated that advice and now maintains that individuals or organizations who offer payment systems that are engaged in the activity of sending funds, satisfy that requirement of the concept of an MSB. These organizations are under the PCMLTF Act’s MSB regulations.

Importantly, if an individual or organization receives money on behalf of a client to pay a debt but does not thereafter pass the payment instructions to the initial payee, they will not be regarded as offering invoice payment services.

For individuals involved in payment services, there are two additional exclusions. An individual or organization will not be regarded as engaging in remittances if they only take payment for products or services they give to their clients, or if they simply offer hardware.

In any case, everybody may request FINTRAC to explain the terms and conditions that will state the regulator’s position on a particular issue. Any company that provides these sorts of services may want to check with FINTRAC to see if their operation is subject to the PCMLTFA now that FINTRAC has made a definite declaration.

Crowd-funding platforms

Companies that offer crowd-funding platform services must now adhere to MSBs regulations. There are several definitions:

  • The supply and upkeep of a crowd-funding platform that is utilized by other people or organizations to raise money or digital money for yourself or for other people or organizations that they specify are referred to as crowd-funding platform services.
  • A site, program, or another piece of technology that is used to collect money or digital money through donations is known as a crowd-funding platform.

These terms are extremely inclusive and may include a lot of types of companies. For instance, some social media platforms let users host fundraising events on their networks. According to this updated definition, based on the activity and how it is carried out, these fundraiser tools may expose social media platforms to regulation underneath the PCMLTFA.

Any platform should be carefully examined in case it falls within the PCMLTFA meaning of an MSB. The commitments under the PCMLTFA for crowd-funding platforms are more stringent than those that applied to MSBs in default. It includes duties to retain records on the reason for which money or digital money is being collected, whoever the money is being brought up for, as well as every individual or company for whom the platforms provide services.

If you want to know more info about the International Anti-Money Laundering Regime, we recommend getting in touch with our attorneys.

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