On July 21, 2022, the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) issued a notice (the “Notice”) to clarify which payment service providers (“PSPs”) are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”) and must register as money services businesses (“MSBs”) or foreign money services businesses (“FMSBs”).
On April 5, 2022, amendments to the regulations under the PCMLTFA (the “Amendments”) came into force that, among other things, expanded the scope of the PCMLTFA to capture crowdfunding platforms and certain PSPs (please refer to our previous blog post for more information regarding the Amendments).
FINTRAC is now taking the position that persons or entities that provide invoice payment services or payment services for goods and services are engaged in the business of remitting or transmitting funds, or dealing in virtual currency.
Accordingly, the Notice provides clarification that if a person or entity is engaged in the following activities, they are providing MSB services and are subject to the PCMLTFA as a MSB or FMSB (subject to additional criteria).
- Invoice payment services: The Notice provides that a person or entity is providing invoice payment services when they act as an intermediary between a payer and a payee to make payments to invoices, such as those pertaining to utilities, payroll and commission, mortgage and rent, or tuition.
Exception: However, the Notice also provides that a person or entity that solely receives payments on behalf of the payee to settle a debt, and does not further transfer the payment instructions to the original payee is not engaging in invoice payment services.
- Payment services for goods and services: The Notice provides that a person or entity is providing payment services for goods or services when:
- they receive payment instructions and act as an intermediary between a payer purchasing goods or services and a payee supplying goods or services;
- the payer consents to make the payment for the goods or services through them; and
- the payee has an agreement with payment service provider to have access to the transfers carried out as payment for the goods or services.
Exceptions: However, the Notice also provides that engaging in the following activities does not mean a person or entity is providing payment services for goods and services:
- a person or entity that solely accepts a payment for goods or services that they supplied to their own customer; or
- a person or entity that solely provides hardware (for example, a physical payment terminal) and does not offer any other associated payment services.
The Notice provides that FINTRAC is currently working with businesses to register certain payment service providers as MSBs or FMSBs. FINTRAC also notes that previously registered MSBs and FMSBs may also be affected by the Amendments, and will be required to update their registration information if they are providing certain activities as payment service providers.