Criteria for “Engaged in a Money Services Business”

Financial Transactions and Reports Analysis Centre of Canada

FINTRAC

FINTRAC Interpretation Notice No. 1 (May 20, 2008)
Criteria for “Engaged in a Money Services Business” This is to provide guidance regarding who is a money services business for purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Effective June 23, 2008, if you are a money services business, you will have to be registered with FINTRAC. For more information, see the Guide for Money Services Business Registration available on FINTRAC's Web site (http://www.fintrac-canafe.gc.ca). Are you a money services business? Effective June 23, 2008, a money services business means an individual or entity engaged in the business of any of the following activities: foreign exchange dealing; remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named individual or entity. A money services business includes an alternative money remittance system, such as Hawala, Hundi, Chitti, etc. What is considered foreign exchange dealing? Foreign exchange dealing is conducting transactions where any currency is exchanged for another. It does not include transactions where change is provided in Canadian currency after the purchase of goods or services (other than any of those in the above mentioned money services business activities) with foreign currency. Any bills, traveller’s cheques, money orders, etc. provided in addition to the one(s) required to pay for the product or service would be considered a foreign exchange. Example: A client purchasing a product with foreign currency (cash, traveller’s cheque in a foreign currency, money order in a foreign currency, etc.) receives change from the purchase in Canadian currency. This would not be considered a foreign exchange transaction. Example: A client provides two fifty US dollar bills as payment for a $20 CDN purchase. The Canadian currency provided for the first $50 US would be considered change; the Canadian currency provided for the second $50 US would be considered a currency exchange. Money services business criteria You are considered a money services business if any of the following apply to you: You own or operate a business and you offer money transfer services in any amount. Your business issues or redeems money orders, travellers’ cheques or other similar negotiable instruments for more than $1,000 during a single transaction with the same individual or entity. For these purposes, a single transaction is defined as two or more transactions related to the redemption of money orders, travellers’ cheques or other similar negotiable instruments of less than $1,000 each that are made within 24 consecutive hours and that total $1,000 or more. Your business conducts foreign exchange transactions for more than $1,000 during a single transaction with the same individual or entity. For these purposes, a single transaction is defined as two or more transactions related to a foreign exchange transaction of less than $1,000 each that are made within 24 consecutive hours and that total $1,000 or more. You advertise (by means of newspaper, television, yellow pages, internet, any other media, or by an interior or exterior sign) the fact that you engage in any of the above-mentioned money services business activities. You hold a permit or license related to any of the above-mentioned money services business activities. You are registered as someone carrying on any of the above-mentioned money services business activities. You report the income of any of the above-mentioned money services business activities as income from a separate business for tax purposes. Exceptions You are not considered a money services business in the following situations: if you conduct money services business activities solely as an agent or mandatary for another business that is a money services business; or if you carry out money services business activities as part of other activities for which you are already subject to the PCMLTFA and regulations. Example: Paul remits and transmits funds solely as an agent for another money services business called ABC. He also uses ABC’s exterior sign for advertisement. Although Paul conducts and advertises money services business activities, because he performs them solely as an agent for ABC, he is not considered to be a money services business. Example: A securities dealer purchasing Canadian securities for a client receives funds from his or her client in Euros. This would not be considered foreign exchange dealing because the purchasing of securities for a securities dealer is an activity already subject to the PCMLTFA and regulations.

FINTRAC Interpretation Notice No. 1 (May 20, 2008)

Criteria for “Engaged in a Money Services Business”

This is to provide guidance regarding who is a money services business for purposes of Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

Effective June 23, 2008, if you are a money services business, you will have to be registered with FINTRAC. For more information, see the Guide for Money Services Business Registration available on FINTRAC's Web site (http://www.fintrac-canafe.gc.ca).

Are you a money services business?
Effective June 23, 2008, a money services business means an individual or entity engaged in the business of any of the following activities:

foreign exchange dealing;
remitting or transmitting funds by any means or through any person, entity or electronic funds transfer network; or
issuing or redeeming money orders, traveller’s cheques or other similar negotiable instruments except for cheques payable to a named individual or entity.

A money services business includes an alternative money remittance system, such as Hawala, Hundi, Chitti, etc.

What is considered foreign exchange dealing?
Foreign exchange dealing is conducting transactions where any currency is exchanged for another. It does not include transactions where change is provided in Canadian currency after the purchase of goods or services (other than any of those in the above mentioned money services business activities) with foreign currency. Any bills, traveller’s cheques, money orders, etc. provided in addition to the one(s) required to pay for the product or service would be considered a foreign exchange.

Example: A client purchasing a product with foreign currency (cash, traveller’s cheque in a foreign currency, money order in a foreign currency, etc.) receives change from the purchase in Canadian currency. This would not be considered a foreign exchange transaction.

Example: A client provides two fifty US dollar bills as payment for a $20 CDN purchase. The Canadian currency provided for the first $50 US would be considered change; the Canadian currency provided for the second $50 US would be considered a currency exchange.

Money services business criteria
You are considered a money services business if any of the following apply to you:

You own or operate a business and you offer money transfer services in any amount.
Your business issues or redeems money orders, travellers’ cheques or other similar negotiable instruments for more than $1,000 during a single transaction with the same individual or entity. For these purposes, a single transaction is defined as two or more transactions related to the redemption of money orders, travellers’ cheques or other similar negotiable instruments of less than $1,000 each that are made within 24 consecutive hours and that total $1,000 or more.
Your business conducts foreign exchange transactions for more than $1,000 during a single transaction with the same individual or entity. For these purposes, a single transaction is defined as two or more transactions related to a foreign exchange transaction of less than $1,000 each that are made within 24 consecutive hours and that total $1,000 or more.
You advertise (by means of newspaper, television, yellow pages, internet, any other media, or by an interior or exterior sign) the fact that you engage in any of the above-mentioned money services business activities.
You hold a permit or license related to any of the above-mentioned money services business activities.
You are registered as someone carrying on any of the above-mentioned money services business activities.
You report the income of any of the above-mentioned money services business activities as income from a separate business for tax purposes.

Exceptions
You are not considered a money services business in the following situations:

if you conduct money services business activities solely as an agent or mandatary for another business that is a money services business; or
if you carry out money services business activities as part of other activities for which you are already subject to the PCMLTFA and regulations.

Example: Paul remits and transmits funds solely as an agent for another money services business called ABC. He also uses ABC’s exterior sign for advertisement. Although Paul conducts and advertises money services business activities, because he performs them solely as an agent for ABC, he is not considered to be a money services business.

Example: A securities dealer purchasing Canadian securities for a client receives funds from his or her client in Euros. This would not be considered foreign exchange dealing because the purchasing of securities for a securities dealer is an activity already subject to the PCMLTFA and regulations.

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Criteria for “Engaged in a Money Services Business”